Tax Deductions That Could Apply to Your Home-Based Business

If you have a home-based business, there might be all sorts of deductions that you just aren't utilizing. Many of these deductions can save you a lot of money when it comes time to file your taxes. Here are some of the tax deductions that could apply to your home-based business.

Electricity

Virtually everyone uses electricity for their home-based business. Because of this you may be able to deduct a portion of your electricity bill every single month. In order to do this, you will need to keep track of the amount of time you use electricity for business each day so that you can calculate how much electricity you've used for work and how much you've used for personal use.

Offices

For those entrepreneurs that have a home office, they may be able to deduct it because it belongs more to the business than to you personally. Offices can receive a deduction based on the square footage of the space compared to the entire home. Because this can be a bit of a gray area, you’ll likely want to make sure that your home is set up with a specific room for your office. If your “office” is the table counter or the living room couch, those areas are likely not used solely for your business, so you won’t be able to count them. If you’re looking for a new house and you plan to set up a home-based business in the near future, look for a single-family home with a designated office.

Internet

Many individuals use the internet to do tasks for their home-based business. Depending on the type of business you run, you’ll use the internet for different amounts of time. You might do all your work online every single day. Alternatively, you might just take a few minutes every day or so to answer your emails and update your records. Either way, the time that you use your internet for business can then be deducted on your taxes. In order to accurately deduct it, you will need to keep track of the amount of time that you use it for your business.

Certain Improvements

If you make improvements to your home office in order to make it a more functional space to conduct your business, you may be able to deduct this as well. These improvements can include things like painting the walls and replacing the carpets.

Equipment

You may need to purchase equipment for your business. Things like computers, printers, office chairs, and desks can all be deducted when they’re business purchases. Don't forget to save each receipt that you received when purchasing these items so that you can deduct them when you file your taxes.

Many individuals are surprised to find that they owe the IRS money after they file their taxes for their home-based business for the first time. Fortunately, you may be able to lessen the amount of money you owe in the future by utilizing certain tax deductions. If you do plan on using any of the deductions mentioned above, make sure you keep all of the receipts and bills that are related to the item that you plan to deduct. This will make it easier to keep track of everything, and you will have the proof that you actually paid these expenses if you end up getting audited in the future.