If you run a home based business that earns at least $600 a year, you know that when tax time comes around each year, you could be losing your shirt! After all, you’ve most likely gone the entire year without paying a dime in taxes, and now that Uncle Sam knows how much you earned, you could very well be paying in large amounts of money to both the Federal Government as well as the State…. that is, unless you discover all of your potential deductions.
Let’s take a look at 10 common deductions that could keep some more green in your pocket each year:
1) Your Home Office – If you have a designated work area that has a window, you are allowed to deduct that expense on your taxes.
2) Office Supplies – With nearly every home-based business there is a need for pens, pencils, paper, staplers, etc. It doesn’t seem like much, but these expenses can add up.
3) Mileage – If you find yourself driving around town for your home business (picking up supplies, meeting a client, etc.), you can log those miles and deduct the expense from your earnings.
4) Telephone – If you are constantly using your phone for business, take note of the ratio that you use it for business vs. pleasure. This ratio can certainly be deducted as a business expense.
5) Contract Workers – Often times, you might need a little help at work. You might pay a neighbor to file some papers or double check your invoicing. Either way, you can deduct this expense as well.
6) Furniture – When you work, you’ve got to have a place to sit and a desk to write on right? These expenses can be deducted. Either take 100% of the expense in the year that you purchased it, or deduct the full expense over the course of 7 years.
7) Work Related Equipment – If you work online, your computer and printer would qualify here. If you restore antiques, this could be your tools. Any equipment that is necessary to your business can be deduction.
8) Travel, Entertainment, Meals – Often times, it’s necessary to learn more about your field or to meet with clients. These travel and meal expenses can be deducted as well.
9) Software and Subscriptions – If you need certain software for your business or if it’s helpful to subscribe to a magazine publication or online site, be sure to deduct these expenses.
10) Insurance Premiums – Even as a home-based business, insurance can often be a very wise purchase. If you have insurance, keep track of your premiums because they are tax deductible.
Take Your Deductions and Save Your Money
I know that for some people, it can be difficult to keep track of all those receipts and expenses, but when they are all added together, the total can sometimes be very surprising! You might have thought that your business only cost you a couple hundred bucks to run each year, but if you factor in mileage, your workspace, insurance, etc., you suddenly realize that you’re shelling out nearly $1,000 to keep your business going.
By keeping track of these expenses, you can legally deduct them from your taxes, which means that you’ll be paying much less in taxes each year! Keep a close eye on your expenses, keep track of them, and you’ll certainly owe less to Uncle Sam each year.
Are you currently taking full advantage of your tax deductions? Which of the ten have you been ignoring?
This post is from Derek at Life and My Finances.