Taxing Matters
Come tax time, you'll be glad you decided to start your own homebased business.
Q: Are there tax benefits
from operating a homebased business?
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A: Without question,
operating your own business from home has several tax advantages.
You can deduct a percentage of many home-related expenses based on
how much of your home you can qualify for a home-office
deduction.
For example, if you have a 2,000-square-foot home and a
200-square-foot office, you could deduct 10 percent of many
expenses. Here are the most typical deductions:
- A percentage of your rent if you rent or lease
- A percentage of your mortgage interest if you're buying
your home
- A percentage of real estate taxes and homeowner association
fees
- Household supplies and cleaning services for the business
portion of your home
- Repair and maintenance of your home office
- Utilities (electricity, gas, water) attributable to the
business use of your home
- Furniture in your household that you convert for use in the
home office
- Phone services, minus the base local service for the first line
into your home (Lines devoted to the Internet and faxing may be
entirely deductible.)
- Business use of your automobile from the time you leave your
door (If you had an office away from home, you would have a tough
time deducting the cost of travel between your home and
office.)
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Taking all the deductions you're eligible for can offset the
higher cost of health insurance you have to pay as a self-employed
person. For more information, see IRS Publication 587, Business
Use of Your Home.
Paul and Sarah Edwards are the co-authors of 15 books,
including The Entrepreneurial Parent. Send them your
start-up business questions at www.workingfromhome.com or in care of
Entrepreneur.