Claiming Deductions For Your Home Business
Claiming deductions for an office in your home is one of the benefits to working at home
, but like everything else, you need to do research before jumping into anything. Make sure that you file the right paperwork and do so correctly, because mistake will come back to haunt you are your bank account.Many believe that claiming a home based business makes you target for an IRS audit because so many people take advantage of the deductions. Just make sure you meet the specific requirements to claim deductions and you shouldn't have any problems.
There are limitations on deductions, and consequences will follow if the IRS standards are not met properly. The best way to go is to only claim what you actually used for your business, and make sure you document everything.
If an auditor from the IRS comes knocking on your door, you should definitely consult with and even hire a qualified tax professional (lawyer and/or accountant) to help you resolve the problem. You should also contact the IRS personally for explanation; but be sure to document the conversation and exactly what was said.
If you legally meet the IRS requirement for tax claims on home business, then you should be able to deduct a percentage of a variety of things. The first and largest deduction is on your home.
The real estate property taxes that you pay yearly can be reduced since part of the building is being used for business purposes. For this, you must measure the square footage of your home, and then measure just the space that is being used for the sole purpose for your business.
The percentage of the home that is being used for work is the same percentage that can be taken off of your yearly property taxes. You can also lower the taxes you pay on interest for your home mortgage.
The interest claim can be tricky; you need to be careful that you only claim it once. Some tax programs ask for it in two different places, but this is a mistake and will definitely get you in trouble with the law.
If you do not own the house you are living in, then you can claim a deduction on your rental payments. You can also take from you homeowner's or renter's insurance.
Any painting, repairs, maintenance, or improvements can be claimed as the cost to maintain your work building. Don't be foolish, however, and try to claim your kitchen remodel as an office building repair.
Make sure you claim only the things that are actually relevant to your company. Trying to cheat the system will eventually catch up to you and cause you financial woes and may even land you jail time.
Having a business at your house means you can write-off your work expenses and pay less in taxes. You can also say things like your phone and internet bills, and any stationary supplies that you may buy are shared business expenses, allowing you to pay less.
Many people wonder exactly what kind of building is necessary for a home-based business, because not everyone lives in a free standing house. The IRS defines a home as a free-standing house, a condominium, an apartment, townhome, or even a boat.
This definition is pretty broad, and allows people in all types of situations to claim their own company as a home-based operation. The only contingency is that you have to be the owner of the company.
If you are employed by a company and work from your home, you cannot claim these tax deductions. Telecommuters may apply for other types of tax deductions, but these guidelines only apply to businesses of self-employed individuals.
If you own a home based company, you should definitely look into and take advantage of the tax deductions that you are eligible for. This can save you quite a bit of money over the years, and make it easier to work from your house.
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