New changes in the tax laws have made it easier than ever to claim Home Office Deductions and keep more of what you earn.
If you carry on your business at home, you can include a lot of your personal expenses as business expenses and get deductions.
You may be thinking, “I have an Accountant/CPA/Tax Preparer/Tax Software who knows all about tax deductions so I don’t have to know anything about them.”
Just because you have a paid tax consultant, does not mean that you do not need to know how to save on taxes. Having information will help you save thousands of dollars. Many accountants/CPAs/tax consultants are not specialists in home-based tax deductions. They are not updated with the recent changes related to home-based businesses.
You have to be informed about what deductions you can claim. If there is a mistake in your returns, you are responsible for it and you are the one who will get into trouble.
To qualify for these deductions you must meet 2 conditions:
Condition 1: Do you work as an Internet marketer out of your home (on your “home computer)?
To qualify for deducting expenses related to using a workspace for business in your home, your home must be
- Your “principal place of business ” or you must use the space only to earn your business income.
- Use it on a regular and ongoing basis to meet your clients, customers, or patients.
Condition 2: Are you in business to make a profit?
Whether you made a profit or not is irrelevant. Even if you lost money but intended to make a profit these deductions are still available to you.
Qualified Tax Deductions
If the above apply to you, then you do own a Home-Based Business and are qualified to deduct Business Assets, Direct and Indirect Expenses.
Business Assets include business equipment such as computer, fax machines, business furniture such as desk (your dining room table for instance), desk chair and filing cabinets. These are 100% deductible if they are used “exclusively” for business purposes.
If these assets are not used “exclusively’ for business the amount you can deduct is proportionally related to how much these things are used in your business. It is possible to deduct a portion of your living room, sofa, DVD player etc if you meet certain conditions.
Direct Expenses are those directly related to conducting your business. This would include office supplies, telephone service, cellular phones, ISP service, hosting, advertising etc. Direct expenses are generally 100% deductible.
Indirect Expenses include such things as rent on your home, utilities including heating and air conditioning and general repairs such as replacing a roof or repainting the exterior of your home.
These are all authorized legal deductions passed into law specifically for Home-Based Businesses by congress.