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WORK FROM HOME : Work From Home Business Tax DeductionsWork from home business has a number of unique advantages. But one of the best advantages is tax deductions. Understanding your business deductions will keep you on the right track for running a successful and profitable work from home business. What is deduction planning? If you own your own business, you can deduct some of the costs of starting a work from home business, as well as the current operating costs of running that business. If you have expenses that are partly for business and partly personal, you can deduct only the business part. To be deductible, business expenses must be both ordinary (common and accepted in your field of business) and necessary (appropriate and helpful for your business). Starting up costs: You can deduct costs incurred in setting up your trade or business, including the cost of investigating business opportunities and requirements, and the cost of acquiring a new business. Generally, though, you cannot deduct these expenses all at once. Rather, you have to amortize, or systematically spread out, the costs over a minimum period of time. Home, auto and business expenses: If you use part of your home for business purposes, you may be able to deduct business-related expenses. For instance, if your home office occupies 25 percent of your home's overall square footage, you may be able to deduct 25 percent of your home's expenses. Your home office is defined as: -The portion of your home used for work / business must be used "regularly and exclusively" for business purposes. -It must also be the principal place that you conduct your trade or business. -It must be the place you regularly meet with clients, customers or patients. If you use an automobile in your business, you may deduct some of your auto expenses: -The cost of fuel, motor oil and lubricants used in your business are allowable tax deductions. -You may also claim the license and registration fees, insurance and the cost of vehicle maintenance and repair as income tax deductions. -If you borrowed money to buy the vehicle, you can claim the interest on your loan as a business expense. If you leased the vehicle, you can claim the leasing cost. -The catch is to be sure you distinguish between business and personal use when claiming auto tax deductions. Business miles divided by total miles driven will provide you with the percentage of expenses that may be deductible. Meals, travel and entertainment: -If you incur expenses while traveling away from your home for your work, you may be able to take a deduction. -Expenses incurred on business trips where you also vacation may also be partially deductible, subject to limitations on the deductibility of all business expenses and subject to certain specific limitations. -You may also be able to deduct 50 percent of costs for entertaining clients and customers, including the cost of meals, as long as the entertainment is related to a business purpose. Health care costs: You may be able to deduct the amounts you pay for medical insurance for you and your family. -Consider the benefits of establishing a health savings account (HSA) if you are covered under a high-deductible health plan. -Individual contributions you make to an HSA are deductible "above the line" when computing your adjusted gross income. 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You’re not alone. One in eight of us have ditched the office to work from home in significantly more stylish surroundings ... |
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