By the Census Bureau’s last count in 2002, half of all businesses in the U.S. are home-based. The U.S. government encourages this kind of entrepreneurship. Dig deep and at-home entrepreneurs will find a few precious tax deductions.
Alterations to the tax code in 1999 made it easier to qualify for home-office tax deductions. Below are five deductions homebodies would be foolish to ignore. To increase your odds of success, be sure to keep your business and personal life separate–including all checking accounts, credit cards and phone bills.
1. Infrastructure (utilities, phone service, housekeeping services, landscaping) Run-of-the-mill homeowners and renters can’t deduct these expenses, but at-home entrepreneurs can.
2. Home mortgage interest and property taxes. U.S. taxpayers can deduct these anyway, but as a small business owner, you can save even more by applying a percentage of mortgage interest and property taxes to the home-office section of your tax form.
3. Travel expenses. You can’t deduct fuel expenses if you commute to work each day, but if you work from home, you can deduct the costs of traveling away from your home for any business-related activity.
4. One-time office equipment purchases. Section 179 of the tax code says you can take a one-time deduction–up to $105,000–for the purchase of office equipment, as long as you don’t purchase more than $400,000 of equipment in a calendar year.
5. Family affair. Sole proprietors with children under 18 who work for them can deduct their children’s “wages.”
Photo by ianus.