Many of the reasons you decided to start a home business are apparent: you can set your own schedule, work in your comfort zone and save yourself the cost of renting office space.
Another benefit that should not be discounted, however, is the ability to deduct many of your expenses. Be careful of going overboard with these deductions, lest you find yourself on the wrong side of the IRS.
At the same time, though, knowing the common home office tax deductions can help you preserve your small business budget.
This will include a percentage of your utilities, based on how much of your home is used exclusively for business. Exclusive is the key word here. Part of the dwelling must be set aside for business use only, so working on a laptop at your kitchen table does not qualify.
2. Household Repairs
If your business involves customers or clients regularly visiting your home, you may deduct a portion of household repair and maintenance costs as a small business expense.
3. Rent and Mortgage
Both homeowners and renters can take advantage of these deductions, provided at least one room in the dwelling is set aside for the home business.
According to the IRS, if your home is your “principal place of business,” a portion of your homeowner’s or renters insurance cost is deductible as a home business expense.
5. Your Car
If you use your personal automobile to travel to business meetings or make deliveries, the cost of upkeep, insurance and gas can be deducted. Be aware, however, that if the automobile is also used for non-business purposes, you will need to track your business-specific mileage, and only that percentage is deductible.
The importance of providing true and valid usage of your home and automobile for small business purposes cannot be overstated. IRS audits can and do happen, and should you find yourself on the receiving end of one of these, the auditor will expect to enter your home and see proof that you have a least one room dedicated to your home business.
As long as you are honest, however, you can successfully save a portion of your small business budget by using the appropriate tax deductions.