Many companies are adopting work-at-home policies that allow employees to avoid traffic jams and conduct business from their laptop. These policies have shown to provide many benefits for the workers and yield in higher productivity rates for the company.
Of course, all that working at home might inspire those employees to set up their own home-based businesses. Web designers, accountants, IT consultants and content creators can all work from their desk and laptop. However, you can also use your home as the base of operations for many types of services such as cleaning, dog walking, catering and day care.
As with any type of business, you will be dealing with all kinds of new taxes as you get your home company up and running. If you are providing a service or selling goods, you’ll need to handle the appropriate sales taxes for your area. Beyond that, there are several beneficial deductions you might not be aware of that you should be taking advantage of. Here are some of the possible deductions you could use for your home-based business:
Your Home Office
In order for you to take advantage of a home office deduction, you have to actually have a home office. Setting up your laptop on the kitchen table doesn’t count. You have to have a dedicated space that is all about the business. It can be in the corner of a room, but it has to be all about the business. The amount you’ll get to deduct will depend on the square footage of that space. That could translate into a deduction from the amount of rent you pay or your mortgage loans.
Your Home Utilities
It stands to reason that if your home office is a legitimate deduction, so are your home utilities. Again, we’re talking a portion of those bills, but things like electricity, heating and the Internet could all be considered business expenses. These are the same kinds of deductions you would take if you were renting out a commercial office space.
Your Office Supplies
Did you buy a new computer this year? What about a printer? Then there are the toner cartridges, the paper, stamps, envelopes and any other items you buy for your office. They are also all business expenses that can be deducted. These items might not add up to a lot, but when it comes to deductions, every little bit helps.
Your Travel Expenses
Did your home business require you to travel to a trade show or expo? Did you need to go to another city to meet a potential/current client? Those travel expenses can be deducted. As an added bonus, if you set up an out-of-town meeting on a Friday and a Monday, you get to deduct your hotel and food costs for the weekend.
Your Auto Expenses
Suppose you work at home and are in need a jolt of java from Starbucks. Can you deduct the cost of driving to get your caffeine? No. However, if you leave your home to conduct business such as a client lunch or meeting, then you can tap into the standard mileage deduction used by a business. Those deductions also cover parking fees, tolls or public transportation costs.
Your Retirement Plan
Just because you’re working from home doesn’t mean you still shouldn’t be saving for your retirement. A tax-deferred retirement account is just that: tax-deferred. The money you put in won’t be taxed. This is a double-dose deduction: You get to take it off your taxes and have it for later in life.
Setting up your home business means keeping track of all your expenses. The daily/weekly dump of receipts is a habit you should get into. If you’re unsure about the deductions, speak to an accountant who specializes in this area. They’ll know what you can take off. After all, if the big corporations use tax breaks, why can’t you?