Albert Einstein, when asked about completing his income tax form, said, “This is a question too difficult for a mathematician. It should be asked of a philosopher.” Last Sunday, as a cool February morning turned into a warm winter’s day, I settled in with a hot cup of Chai tea, turned on the TV, and tried to turn off my mind. Within 15 minutes, half a dozen tax preparation ads came and went. I decided to get philosophical about it, and couldn’t help but wonder about all the deductions I might be missing — especially as a home business.
A quick Google search on tax deductions ends in a flood of results varying from personal to corporate. We’re going to highlight some of the best (IMHO) and most overlooked deductions for home businesses we’ve come across.
This deduction is one of the most obvious for a home business, but it’s often left off the tax filing because many people are afraid that it will lead the IRS straight to their door with an audit notice. However, the deduction is completely legit and does not have to be ignored. The IRS allows for a home office to be comprised of a room or just part of a room. You do need to make sure that the room is not used for anything else if you want to claim the entirety of it. Otherwise, just calculate the square footage of your home workspace. H&R Block will help you crunch the numbers: https://www.selectaware.com/stores/HR-Block/coupons
Business Furniture & Supplies
Business furniture can be a major expense. The good news is that it’s 100% deductible in the year of purchase or can be depreciated over time, which means you have options. And it’s always good to have options. Likewise, your home office supplies can be written off as an expense, so hang on to all those receipts for pens, paper and especially computers. Just because you can write it off doesn’t mean you don’t want save some money when purchasing, right? Find great deals on home office supplies here: https://www.selectaware.com/categories/HomeOffice/coupons
Your car is not only a depreciable asset in and of itself, but the miles you rack up driving to all those appointments and running business errands is also deductible. The IRS puts out a mileage calculation rate each year to help you calculate your expense. Here is a link to the 2012 IRS rates site: click here
If you travel a lot for business, you probably already know that transportation is 100% deductible, as is lodging. However, those airline baggage fees can really pile up, and they’re also 100% deductible, so don’t forget to save those receipts and turn them in.
Software & Subscriptions
This category is often overlooked by home offices, but it can really make a huge difference if your business requires substantial software investments. You don’t have to depreciate these costs anymore. You can take the full amount in the year of purchase, along with your subscriptions. If your business doesn’t yet utilize an accounting program, you can save time and money with Quickbooks: https://www.selectaware.com/stores/QuickBooks/coupons
There are hundreds of pages of information about deductions and home business tax filings, so always proceed with caution and seek sage advice from a pro. But don’t be afraid to let the tax code work for you. If you incorporate these often overlooked tax breaks into your filing this year, you may find yourself with a much better looking return than you expected.
I hope you enjoyed this article and found something valuable for your business here. But tell me, what deductions did I miss that have saved you in the past?