When you are working for yourself suddenly a lot of tax deductions swing your way.
Most deductions will revolve around the expenses and activities that you do to run and create revenues for your home business. If you incur expenses in the creation of this taxable income, then you can deduct some or all of these amounts.
Please note: tax regulations are different everywhere, and you need to discuss what you are really eligible to deduct with a Tax Preparer, as well as what paperwork or journals or log books need to be kept.
1 – Fees.
This includes any sign up, monthly fees, or monthly required purchases to be eligible for commissions.
So, if your company required a sign up cost of 50$, with no monthly fees, and a minimum personal purchase of 100$ to be eligible for commissions, then these should be 100% deductible.
2 – Training and Improvement.
Let us say that you invest in improving your skills by purchasing a course, and books. As long as they are geared to improving your skills for this revenue creating business, then these should also be up to 100% deductible.
3 – Car, communication, and Home Expenses.
If you use a part of your home for your business, whether storage for inventory, for administrative work, or to meet clients, then a % of the home costs (energy, taxes, interest) are deductible. This is best to be under 12%.
For the use of your car to visit with clients, or meetings, you can deduct a portion of the car expenses (gas, maintenance, and depreciation, interest, or lease payments). However, you are not using your car for 100% of your business, and so it is not 100% deductible. You need to keep a log book and weekly activity sheet to track your mileage and meetings to justify the use for business. A % of these total costs is then eligible to be deductible depending on what % was used for your business.
This also applies to the use of the Internet, Cell phone, and faxes. But, again this will depend on the % of usage for your business. You are not expected to deduct 100% as business, as there is personal use.
4 – Advertising and Promotions.
You can deduct 100% of any advertising or promotional costs. This includes print media, kiosk, online media, and samples. But, for samples you need to keep track of how much and who you gave your samples too.
This also includes websites, blogs, and online advertising.
5 – Events.
If you attend events, the tickets and expenses can be deductible.
If you host events, you need to take attendance, and then the expenses can be also deducted. This attendance includes the person’s name, contact information, and person who invited them.
6 – Meals.
If you take a partner or potential client for a meal, then the portion that is theirs is a deductible expense.
7 – Stationary, Storage, and Devices.
Any toner, paper, envelopes, postage, or other expenses to communicate or run your business are also eligible expenses to deduct.
If you have to buy a fax, laptop, scanner, or other electronic devices, then these are also expensible.
Any furniture that you have to buy for your office, or renovations to create your work space can also be deducted.
Preparing your taxes….
In all of these cases you need to maintain receipts, and to document.
I recommend that you do a monthly reconciliation of your costs and revenues. It will make it quicker to do your annual income taxes when the time comes.
If you want to learn about the opportunity that I work with that has tax deductions and great revenue potential internationally, click the LEARN MORE HERE button below, fill in the form on the link, and I will send you the details and be in touch!
Items that you are not eligible to deduct will include things like: a Golf Club memberships, a Gym membership, hair cuts, dry cleaning, and clothing. Clothing is only deductible if it is part of a Uniform that is Required for your activities with your work.
Some of these expenses existed prior to starting your Home Business, but now a portion of them have become tax deductible. Herein lies advantages. Being able to now deduct these expenses creates a better tax position, plus the additional income helps to offset these expenses.
Please note that these are examples of expenses that are considered deductible against the revenues from your Home Business income, and you should consult with a tax preparer in your area to ensure that you are using the right expenses. Getting it wrong can cost you penalties and interest when the Government audits you.