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9 Deductions for Your Home Business – OnlineBusinessDegree.org

According to the U.S. Small Business Administration, more than 52% of all small businesses — independent businesses that have less than 500 employees— are home-based. A home business is simply a business whose primary office is in the owner’s home. If you work out of your home and file Schedule C each year, you’ll want to be sure you are claiming every deduction you as the sole proprietor of a business is entitled to. Take a look at these nine legit deductions you can claim as a home business owner, and see if you can’t save yourself some money when it comes time again to do your taxes in South Carolina, South Dakota, Ohio, Kansas, Illinois or whichever state you reside in. (We also strongly recommend you consult with a certified accountant about deductions and current tax laws.)

  1. Home office

    This one is actually a little tricky, because the IRS has strict requirements for what constitutes a home office. Your office may be just one room or a portion of a room but, in order for you to claim it as a deduction, the area must be used exclusively, regularly, and principally as a place of business. The amount you can deduct will depend upon the percentage of your home that is used for your business. If you use a separate, nearby structure exclusively to conduct business, for instance a garage or, if you’re an artist, a specially constructed studio, you can deduct expenses related to it.

  2. Utilities

    Keep in mind that the IRS includes houses, apartments, condominiums, mobile homes, and even houseboats in their definition of a “home” and that you don’t need to own your home in order to claim deductions for your home business. Expenses for the portion of your home used for business, including rent, repairs, and utilities, are deductible. Over the course of the tax year, save copies of your utility bills, since as a home business owner, you can deduct a percentage of those bills.

  3. Business phone and cell phone

    You can deduct the cost of maintaining a landline or cell phone that you use for business, even if you don’t have a home office space in your home. The size of a home office deduction does not need to match that of your phone use; they’re considered two separate deductions. Since you may use your cell phone for non-business related calls, the IRS allows you to deduct a percentage of your costs as they relate to your business. Ask your accountant for assistance in determining your percentage of deductible business-related phone use.

  4. Professional and legal expenses

    And while you’re talking to your accountant, find out how much he or she is charging you, even if you’ve only hired them to work on and submit the year’s taxes. Accounting fees and the costs for tax advice, are deductible as professional and legal expenses. If you’ve just started your business, and you paid legal fees to form a corporation or partnership, those fees are deductible as well.

  5. Internet and web hosting

    What small business in the 21st century doesn’t have a website? Home business owners can deduct the costs for web hosting, domain registration, and webmaster costs as they relate to their business’ website. Internet access fees, including fees as they are bundled in your phone or cable plans, can be deducted as well, as long as you’re deducting an accurate percentage of business-related Internet use.

  6. Storage and inventory

    Unlike the office-in-the-home deduction, an area of your home used for your business’ storage and inventory need not be exclusive to your home business. So for instance, if storage space in your garage holds product samples and inventory you sell, along with the family lawnmower and backyard trampoline, the expenses for the storage space are still deductible. This is especially helpful if you store products that you sell regularly, or if you need to store tools used in your business. Check with your accountant to determine the amount you can deduct for such a storage area.

  7. Equipment

    Equipment for your home business can include a computer, printer, server, copy machine, refrigerator, and even a vehicle. Such purchases with a useful life of less than one year, including electronics and hand tools like shovels and rakes, can be deducted as an expense. However, equipment your company anticipates will be useful for more than one year, such as a large refrigerator for a catering business, is considered a capital asset by the IRS. Home business owners can deduct the expense of a capital asset through depreciation, taking a portion of the cost of the capital asset annually over the course of its lifespan. Check out the the IRS website for more information about depreciation.

  8. Business entertainment

    Suppose you host an open house event in your house in order to meet members of the business community and potential clients and promote your business? This is a little different than a business meal, which is a deductible expense so long as you and your eating partner are talking business before, during, or after the meal. The cost of a larger, catered event in your home is deductible as business entertainment. Definitely keep receipts and detailed records of such events, and consult your accountant with any questions about such deductions.

  9. Netflix, DVDs, streaming services

    Do you view movies, through a service like Netflix just for fun? Or is viewing films and television a crucial part of your research and development as a creative business owner (a scriptwriter, costume designer, graphic artist)? You can definitely deduct the cost of the business use portion of streaming services like Netflix, as well as DVDs you rent or purchase for such viewing.

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