Every year, we have to do our taxes and face having to pay more taxes or try to maximize the amount of money we get back. There are tons of ways to lower your income taxes, but the best way to lower your income taxes is to run a home business. Before we go any further, I am not an accountant and cannot tell you exactly what you can and cannot do, but this should give you an idea of how much you can save and help you decide if you want to start a home business.
There are 2 very good reasons to start a home based business. Making money is the obvious reason for starting any business. The second reason that many people don’t consider is to lower your income taxes. Personally, I cannot see any good reason not to start a home business. All it takes is a little work and you can probably turn something you already do into a business. For example, if you sell stuff on eBay from time to time, that could be a business. Do you make crafts that you sell from time to time at an arts and crafts fair? How about baby sitting or cutting grass? All of these can be considered legitimate businesses if you structure them correctly. A good tax professional will help you find the right business and business deductions.
Here are a few things you can look at deducting. An easy deduction is anything you spent to start your business. I, for example, paid $400 to start a business as an Ambit Energy marketing consultant. When I do my taxes, I deduct that cost and get approximately 1/4 of it back. This reduces the amount I paid right off the bat. Now that I have a business, I am liable to talk about my business anywhere I go and I always carry business cards to hand out. If you keep good records of where you went and how far you drove, you can deduct your mileage as a business expense. It is very easy to drive 10,000 miles over the course of a year and that is worth over $1000 to you on your income tax return. If you ever travel and talk about your business, you can deduct your travel expenses including hotel costs. This can make your vacation tax deductable if you keep good records. Other things you can deduct include your power bill, phone bill, internet connection, and anything else you use for your business. For me, I can deduct part of my Ambit Energy electricity bill which I get a commission on as part of my business so it is almost like double dipping. This is just the beginning of what you can deduct, but you really need to have a good tax accountant to get the most out of your deductions while staying out of trouble with the IRS.
Using a tax professional is probably the best thing to do at tax time, but there are also a ton of income tax software packages out there that will save you time and money if you know what you are doing. Oh, don’t forget you get to deduct whatever you spend on taxes now because it is a business expense too. When you add all this up, I cannot see why anybody wouldn’t want to have a home business. Granted, it will take a little more time and cost a bit more when it comes to taxes, but to get an extra $1000 or more, it seems worth the extra time.
One more time before I go, I want to recommend that you seek the advice of a tax professional at least to help you get everything set up. You will stay out of trouble with the IRS and get the most out of your expenses.
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