I have been working from home for 30+ years now and have learned a tip or two about taking credits and deductions for my home busniess at tax time. Many people are finding lucrative work at home a business especially with all that is available online such as blogging and running successful ecommerce sites. It is important to understand all the tax advantages of running a business from home and to be sure that you are taking all the tax credits you are entitled to take each tax year.
In order to take advantage of all the tax breaks of owning a home business it is important to keep a good record of all of your household and business expenses each month.
One tip many miss is in how they file when running a home business. If your spouse has been paying taxes all year out in payroll tax deductions then it is probably a good idea to file a 1040 and clam “married” with joint return. It is wise to be sure that you are filing properly by consulting a tax professional.
Those who live and work in the same space can have cross-over expenses. Ask your tax professional about your ability to claim some of the expenses you have running your home such as utilities, Internet service, mobile phones, and even your rent/mortgage to be sure that if you can claim any portion of these expenses as business expenses that you do so on your tax form.
Don’t forget that if you pay for daycare in order to work from home that your daycare expenses can usually be deducted. Most people make the mistake of thinking that because they do not leave home that they won’t be able to claim these expenses. Check with your tax professional to see what portion of these daycare expenses you can deduct on your tax form.
Ask your tax professional about taking credit for being more energy efficient as there are some deductions for purchasing and installing energy efficient products like insulation, roofing, solar energy sources, energy efficient vehicles and special windows.
Another good tip is to ask your tax preparer to go over last year’s taxes to see if you missed any deductions or credits. Tax laws change from year to year and there are so many tax rules to keep track of that it can be easy to miss something when preparing taxes. Finding a deduction or credit that was missed can make a difference and is worth the time and effort to check last year’s tax return. The time you spend checking could result in more money in your pocket this tax season.
Working from home does not mean that you have to miss out on legitimate business expenses and credits. Be smart and consult a tax professional about all the ways you can find money by filing correctly, taking all the deductions and credits you are entitled to take and by preparing your taxes in a way that allows you to realize all the tax benefits of working from home.