What Are the Ultimate Home-Based Business Tax Advantages?

One of the great things about starting a business from home is the tremendous tax advantage they provide. Just think, when April comes around again, you will be rejoicing instead of crying! So, let’s see exactly what the tax advantages are for your home based business.

First of all, in any home business you have tremendous more tax advantages than if you were self-employed. These advantages really become huge when you consider how you can improve the profitability of your home business by declaring all of the deductions you are entitled to. Never forget to claim all of the necessary deductions. If you have difficulty figuring it out, go to a CPA.

You will also need to itemize your deductions for your home business operation on a separate schedule just as you would for your personal deductions. Knowing which deductions you are entitled to can save your home business hundreds of dollars a year. Isn’t this great news? Just the tax advantages make starting a home-based business makes it worth it.

Here is some background information on how your income tax amount is arrived at by the IRS.

The U.S. taxation code states that almost all income is subject to federal income tax. How can you, the guru of your home-based business, arrive at the final amount of income tax? Here’s how:

Gross Income – (All Expenses + Miscellaneous Deductions + Depreciation on Assets) = Taxable Income.

Taxable Income X (Your Tax Rate) = Income tax for the fiscal year.

Here is a quick definition of the terms in the above taxation equation:

Gross Income = The total of all income for the year after the cost of the inventory has been paid for. Make sure you leave nothing out.

Expenses = All costs of doing business during the fiscal tax year. Examples include payroll, materials, supplies and interest on business loans, etc. To find out if an expense qualifies as a legitimate business expense, consult your CPA. You can also call your local small business bureau, or even the IRS.

Depreciation = This is the way of spreading out the deductibility of an asset over a period of more than one year.

The IRS has certain different depreciation schedules for different business property. This is done for assets like real estate, equipment and other assets with a long economic life. This method of taxation write-off has certain advantages. Be sure to talk to your accountant regarding proper depreciation rules. These rules are subject to change by the Congress and the IRS.

Miscellaneous Deductions:

This is an often misunderstood and overlooked way to save a lot of money on taxes. Remember that these types of expenses must be totaled up and declared on a separate schedule of your income tax forms.

Always track your expenses and be sure to save at least one copy of every deduction. You will be asked for proof of every transaction that is declared as a deduction if the IRS audits you! Never make the mistake of not keeping records of yAlso, save them for 7 years.

Here is a list of some of the things you can deduct from your income taxes:

Business related expenses include:

1. Air fares

2. Auto expenses

3. Books and Magazines

4. Educational Expenses

5. Home Office Space* + a portion of utilities, telephone, and maintenance costs

6. Office Furniture

7. Cleaning Expenses

8. Meals with Business Clients

9. Laundry Expenses (When Traveling)

10. Advertising

11. Impairment-related Expenses

12. Licenses and Regulatory Fees

* If you own your home you must use the IRS depreciation rules to determine this deduction. If you rent you may also deduct a portion of your rent.

Check IRS Publication 535 to find out if you can deduct any or all of the above.

As you can see there are numerous deductions that are allowable for your home-based business. The best way to get more information on tax deductions and related information on income taxes is to go online to http://www.irs.gov. There you will find a helpful search engine containing thousands of government publications that you can research and print out if you need to.

Now you have a good idea of the deductions you are entitled to take. So do your research, keep track of your expenses and take all of the deductions you can for maximum profit every year. April will never be a time again for weeping and gnashing of teeth!

Copyright 2006 Monique Hawkins

Home Business – Start Organised, Stay Organised, Save Time

When you start a new home based business, it is easy to overlook or put off some of the boring mundane chores while you concentrate on building up your business. One such chore is creating a proper home office filing system for your business documents. In all the excitement and hard work of the first weeks and months of running a new home business, it will be hard to find time for everything you need to do. Good time management strategies will pay off but, even if you have worked out a schedule for yourself, this will almost certainly need some fine tuning to get your days running smoothly and you will probably find you have too many chores to get through each day.

Putting things off is never a good idea and filing is no exception. If you procrastinate, the task will not go away and you will, in fact, find it has grown bigger and more difficult to manage. The amount of documents you generate will depend on the type of business you have started. Even an Internet based home business, which seems pretty much paper-free, will have certain documents that need to be filed for future reference.

Obviously, one aspect of keeping paperwork neat and tidy is that you won’t be wasting time unnecessarily if, instead of searching through piles of documents, you can put your hand straight on the piece of paper you need at any moment. The other reason an efficient filing system is necessary is because, as a self employed person, you are responsible for your own taxes.

Tax time is as regular as Christmas (albeit not so welcome) but, for most people, it inevitably seems to arrive too soon and create a flurry of last minute calculations and frenzied searches for missing documents. A simple filing system can take the pain and anxiety out of tax time. With documents filed in a logical manner, it is easy to collate all the information needed to fill in your tax returns. Don’t forget that, when you work at home, you are allowed to claim tax exemption on a proportion of some of your normal household bills such as heating, phone, broadband connection etc. So, as well as keeping proof of purchase for business items such as stationery or travel expenses, you need to have evidence of your everyday domestic outgoings to back up your claim for tax exemption for those items.

You can have an efficient filing system even if you don’t have space for a filing cabinet. A filing cabinet is useful but not essential; as long as you keep all your folders and ring binders together, you can create a system that will work for you. The basic things you need are some ordinary cardboard folder files, a couple of ring binders, and a highlighter pen. Make sure the folders are clearly labeled as to contents and make sure to separate documents into logical groups. Place all lighting and heating bills in one folder, phone bills in another, vehicle and travel expenses in another, stationary bills in another and so on. You will probably want to have a miscellaneous folder to file the odd bits and pieces that don’t really fit in any obvious category but don’t overuse the miscellaneous folder, if a piece of paper can be allocated to a “proper” category, put it where it belongs. Use the ring binders to hold bank and credit card statements, with the most recent statement on top.

The marker pen will save you a great deal of time provided you use it consistently. Keep the highlighter pen wherever you normally read your mail. As soon as you open a bill use the highlighter pen to mark the bill total. Then, when you are doing the figures for your tax return, you won’t need to look down a column of figures in search of the total: the figure you need will leap right out at you. If you use your personal credit card or bank account for your home business purposes, you will need to distinguish the business expenses from personal spending. When you open a bank statement or credit card, highlight all expenses and income relating to your business as you check the statement. If you pay for things for business use online, keep a highlighter pen by your computer. As soon as you download an invoice for goods or services bought online, highlight the total before you file the document.

It is not hard to highlight figures on documents as soon as they are received and doing so will save you time, it is just a matter of getting into the habit. Filing bills and statements in separate folders and binders only takes seconds longer than throwing them all into one folder but doing this will save you hours in the long run and those hours can be used productively in building up your home business.

Miscellaneous Home Mortgage Solutions to Fulfill Demands of Each Applicant Closely

Many homeowners do not make the most of present low rates not because they do not wish to save money but they either do not have time or know how to do the home loan shopping. Home mortgage loan refinance candidates have wide option in the present market from start to the completion. They have the option of resources to find their mortgage including mortgage brokers, online refinance systems and going promptly to a particular lender. The third alternative could not be beneficial if you have not concluded a comparison rate shopping in advance.

Today it is much simpler to finish a mortgage search in a short time online. You will get calculators on a few mortgage websites however you may not even need it as the quotes you will get from online platforms will be delivered with all the calculations have already been done for you. All you concentrate doing is to come up with a decision on how you would press on.

Although the essential criteria in looking at refinance mortgages is the interest rate, it is not the only factor to take into account. When it comes to home loans the selection of lenders is not restricted to the big banks. There are plenty large, medium, small, nationwide and local lenders facilitating a diverse solution with ideal features and appealing interest rates. The upfront costs and early redemption penalties should be taken into consideration whilst assessing an instrument. A loan with a little higher interest rate but with no closing costs may work out cheaper than a product with a low interest rate and higher upfront fees. The appropriateness of the mortgage product to particular needs of a borrower has to be examined. Characteristics like a draw-back opportunity or an offset account advantage may aid the homeowner in the long run and should be taken into consideration.

After the full search is done, your current home mortgage loan may still be competitive enough for you to stay put. However, it would be smart spending a few minutes to know for sure.

Guidelines on Purchasing a Second Property As a Vacation Home

Renting the same hotel or rest house every time you want to take a trip to your favorite relaxation area can be very expensive. Avoiding those miscellaneous bills is now possible. Since the prices of real estate properties have continued to decline, you can now think of investing on your very own vacation home. This would give you the luxury to spend the rest of your vacations within the comforts of your own property. It would serve as your private sanctuary, a place where you can relax and have good times with your loved ones.

However, you should consider some things before buying a secondary residence. After weighing its pros and cons, you can continue your plans of investing on this wonderful opportunity. Here are some important guidelines that you should remember while purchasing your very own second property.

Weighing the pros and the cons

Before everything else, you should prepare yourself for this big decision first. Try to reevaluate your decision by thinking of all the advantages and disadvantages of buying a second home.

The first question you should ask is your willingness to keep up with the maintenance costs of a vacation home. A lovely beach house or bungalow near a beautiful resort might sound appealing, but it also adds up to your list of commitments. You will also need to complete miscellaneous expenses, including expensive home insurance policies. Once you are willing to face these responsibilities, there would be fewer problems in your future purchase.

You should also think of the advantages that you would earn from a second property. Of course, it would give you the opportunity to forget expensive renting while staying in vacation hotels. You would also benefit from the different tax breaks and deductions that are granted to owners of second homes. Try to list down all these benefits, and compare them with the disadvantages that a vacation home could bring.

Proceeding with your purchase

Once you have discovered that investing on a new property would be a better choice, you can already proceed to making your purchase. There are three important steps involved in purchasing a second house – looking for the perfect property, applying for a mortgage, and hiring a real estate agent.

During the first step, you should remember all of your needs as a homeowner. Is proximity important to you? You should look for a location that is near your primary residence. Do you fancy a particular house type like a cabin, condominium unit, or traditional houses? Make sure to specify all your prerequisites when it comes to your ideal vacation home.

Next, assess your need to apply for a mortgage. If you cannot handle to purchase a new house in cash, you will need a lending institution to assist you with your purchase. Make sure that you can reach the requirements of your preferred lending company in order to avoid problems with rejected mortgage applications. Check your credit scores, financial records, and all your requirements before acing your lenders and asking them for a mortgage.

Lastly, you should look for a competent agent who can assist you while purchasing your second property. Check his qualifications and identify his capabilities to provide you with listings of your ideal potential houses. Find someone competent enough to guide you while shopping for a house and dealing with the settlement process.

Always remember these guidelines while purchasing a new vacation home. Be prepared to give it the same amount of attention that you have been giving to your primary residence.