A look at home business write offs
When it comes to running a home business many people are not aware that most the tax write offs for home businesses is a lot different from those of a regular business. But some of the write offs are the same, that is if your home business has some of the same expenses, such as wages and health insurance premiums for employees and other similar expenses. But then there are the other expenses that many small businesses don't incur, such as a home office expense, and other expenses that both types of businesses seem to incur, such as utilities. But the thing is that even if the expenses are similar or different there are different rules and guidelines that must be followed for home businesses compared to small business and the reason behind it is that home business are ran out of the home which means that you need to separate personal use from business use. So the guidelines for claming certain write offs is a bit tougher.
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Here is a look at some of the write offs for home businesses.
Number one:
One great deduction for a home business is the miles that you drive for business purposes with your personal vehicle. But the great news about this write off is that it can be used for other types of businesses as well. To help keep track of miles you will need to get a notebook and a pen to keep in the car at all times. If you get in the car to drive for business purposes you will need to write this down in your notebook. Be sure to record the date, the mileage when you left and the mileage when you returned, as well as the total miles driven. Also be sure to include what the purpose of the trip was. At the end of each month you can then input this information into your computer on a spreadsheet or similar software, but do not get rid of the papers from the original notebooks. When the notebook is full or if it is the end of the tax year you should file the notebook with your tax papers.
Number two:
If you want to use your computer or any other electronics you have as a business expense you will need to keep a log of all activity. The IRS requires stricter reporting when it comes to using computers, video cameras, etc for business expenses because so many of them are also used for pleasure. To do this you should keep a notebook of some sort right next to your computer to record the day and time spent using the computer for business purposes, you should do this everyday. Then make sure that you file the records with your tax papers at the end of the year so you can prove to the IRS that you did use your computer for business purposes.
Number three:
If you plan on deducting a home office expense and the computer expense you should record in your tax records the exact location of the home office, how many square feet it is, the square footage of your home and where the computer is located in the home office. This will make it easier if the IRS ever wants proof that you are using a home office for business purposes.
Number four:
Make a list of all possible business expenses. Do not rush when doing this because you might only see the obvious expenses. Some expenses that you might consider is paper for your printer, your coffee that you drink during working hours, computer software that is used for your business (if you also use it for personal use you should not deduct all of the expense) and the list goes on. By keeping track of your potential deductions you can maximize your business write-offs and can keep better records of the expenses.
Number five:
Keep all of your utility bills. If you have a home office you can not deduct your entire utility bill because majority of that bill will be for personal use, but you can use a portion of the bill as a business expense depending on how many hours you work at home.
