Get All Your Home Business Tax Deductions

By: Veronica Kirchoff

In any small home business you definitely have more tax advantages than if you were simply an "independent contractor" or "sole proprietor" claiming the income on your personal 1040 tax return. The tax advantages become substantial when you consider how you can improve the profitability of your home business by filing a separate Schedule C for your business income and declaring all of the deductions you are entitled to.You may be missing some very important deductions. You must itemize your deductions for your home business operation on a separate schedule just as you would for your personal deductions. Knowing which deductions you are entitled to can save your home business hundreds of dollars a year.
Here is some background information on how your income tax amount is arrived at by the IRS.
The U.S. taxation code states that almost all income is subject to federal income tax. The way that you, as the owner of your home business, arrive at the final amount of income tax is as follows:
Gross Income - (All Expenses + Miscellaneous Deductions + Depreciation on Assets) = Taxable Income
Taxable Income x (Your Tax Rate) = Income tax for the fiscal year
Here is a quick definition of the terms in the above taxation equation:
Gross Income: The total of all income for the year after the cost of inventory has been accounted for.
Expenses: All costs of doing business during the fiscal tax year. Examples include payroll, materials, supplies, interest on business loans, etc. To find out if an expense qualifies as a legitimate business expense, consult your accountant or the IRS.
Depreciation: This is a way of spreading out the deductibility of an asset over a period of more than one year. This is done for assets like real estate, equipment and other assets with a long economic life. This method of taxation write-off has certain advantages. Be sure to talk to your accountant regarding proper depreciation rules. The IRS has different depreciation schedules for different business property. These rules are subject to change by Congress and the IRS.
Miscellaneous Deductions: This is an often misunderstood and overlooked way to save a lot of money on taxes. Remember that these types of expenses must be totaled up and declared on a separate schedule of your income tax forms. Always track your expenses and be sure to save at least one copy of every deduction. You will be asked for proof of every transaction that is declared as a deduction if you are audited by the IRS!
Here is a list of some of the most common business related expenses you can deduct from your income taxes:
1. Airfare
2. Auto Expenses
3. Books and Magazines
4. Educational Expenses
5. Home Office Space* + a portion of Utilities, Telephone, and Maintenance Costs
6. Office Furniture
7. Cleaning Expenses
8. Meals with Business Clients
9. Laundry Expenses (when traveling)
10. Advertising
11. Bank Fees and Interest
12. Licenses and Regulatory Fees
* If you own your home you must use the IRS depreciation rules to determine this deduction. If you rent, you may also deduct a portion of your rent.

Check IRS Publication 535 or contact me to schedule a consultation to find out if you can deduct any or all of the above.

As you can see, there are many deductions that are allowable for your home business. The best way to get more information on tax deductions and related information on income taxes is to go online to http://www.irs.gov. There you will find a helpful search engine containing thousands of government publications that you can research and print out if you need to.

Now you have a good idea of the deductions you are entitled to take. So do your research, keep track of your expenses and take all of the deductions you can for maximum profit every year.

Article Source: http://articles-book.com

For more information on www.veronicakirchoff.com/bookkeeping.htmlâ��>BookKeeping & Accountancy / www.veronicakirchoff.com/tax_preparation.htmlâ��>Tax Preparation Service Please visit our Website www.veronicakirchoff.com">www.veronicakirchoff.com

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