In-home businesses seem to be more popular than ever. The internet has made it possible for people to work from virtually anywhere, including your very own home! There are many ways people can earn a lucrative income and enjoy tax deductions that can save them money. Whether it’s a salon, daycare, consulting business, or something completely different. The only problem with that is that many people who do have an in-home business, forget to take advantage of the applicable tax deductions. That means they are paying more than they need to.
Allowable Small Business Expenses that Often Get Overlooked
1. Can I Claim Business Use of Car & Vehicle Expenses on My Taxes? Even if you don’t need to run out very much for your in-home business, you can deduct any expenses when you do use your vehicle for anything related to your business. This can include registration and licensing, oil and gas, maintenance and repairs, and possible leasing costs. You can take a tax deduction for supplemental insurance that covers you whenever you use your car for business. You can also deduct interest on any money that you borrowed to buy the vehicle. You will need to keep detailed records of your vehicle use if you use it for business and personal reasons.
2. Calculate Insurance Expense. On top of the insurance you have on your vehicle, you can deduct the insurance that you have on your home. You can also deduct any insurance you have on equipment or machinery you use for your business.
3. Property Taxes & Mortgage Interest Tax Deduction. If you currently have a mortgage on your home and you use it for your business, you can claim both the property taxes and interest. However, there are a few things you will need to keep in mind. First, the space must be used as your primary place of business. Second, you will need to use the space on a regular basis for work matters. If you rent your home, you can deduct that expense too, but only for the areas designated for work-related purposes. You will need to know the exact square footage of that area to for the deduction.
4. Computer & Office Related Expenses. Any items you purchase, from pens, pencils, folders, paper clips, stamps, etc., to run your business from home can be deducted. You can also deduct your phones and tablets, computer, printer and fax machine. Make sure you keep receipts because you can only claim a portion of the original purchase price due to their depreciation over time.
5. Miscellaneous Home Office Business Expenses. There is another category of deductions when it comes to an in-home business. Things like phone, internet, utilities, and even cleaning supplies can be deducted. You will need to keep detailed records to show that these expenses are indeed used for your business.
6. Retirement Plan Contributions. You can save on taxes by setting up a retirement plan. There’s a misconception that these are only for large businesses, but that’s not true. A great example is a defined benefit plan. It allows you to put more money away than a 401(k) account and you can use it as a tax deduction at the same time.