If you have just started a home-based business or are taking care of accounting activities on your own for the first time, make sure you are aware of some of the little-known tax breaks available to you. Many home-based business owners are able to deduct several different types of business expenses based on the type of business they run and expenses incurred over the course of the year.
Here are some little-known tax breaks for home-based businesses:
Home Office Use
You can deduct the cost of using a part of your home as an office if you meet certain criteria. Whether you have converted a spare room into your office or have turned the entire garage into a workspace, you can deduct the percentage of the area you are using for the office as an expense. You can also include renter’s insurance for the portion you are using as an office and utility bills associated with keeping that space running.
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Don’t overlook the option of deducting the cost of office supplies used to run your home-based business. This might include everything from printer ink and paper, to paperclips, pens and pencils, and other everyday supplies. If you purchased any new equipment, such as a new computer or a printer, you can also deduct some or all of the cost of that equipment depending on how much you use it for your business.
If you are paying for gas, a hotel stay, and other travel expenses when meeting a client or are attending any type of conference related to your business, you will be able to deduct some of those travel expenses. You can deduct everything from the cost of transportation and accommodations, as well as half of the costs of your meals on business days. Even if you only end up traveling a couple of times a year, you may be able to get a significant tax break for incurring some of those extra expenses.
Even though you work from home the majority of the time, you may encounter some type of commute when you are performing work outside of the home for a client, to conduct research, or when taking care of any other job-related activities. As long as you keep detailed records of these costs, you will be able to take the standard mileage deduction and any costs related to parking.
Anything related to upgrading or updating your office may also be deductible. For example, if you bought new office furniture such as a bookshelf, desk, lamps, or other items that are used solely in the office, you would be able to deduct the cost of those items completely.
This is an easy one to overlook but those who are self-employed will be able to deduct the cost of health insurance for themselves and their family over the course of the year. Just make sure you are aware of the limitations if you were participating in an employer-subsidized plan at some point.
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