In any home business you definitely have more tax advantages than
if you were self-employed. The tax advantages become substantial
when you consider how you can improve the profitability of your
home business by declaring all of the deductions you are entitled
to.

You may be missing some very important deductions. You must
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.

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. The way that you, as the owner of your
home business, arrive at the final amount of income tax is as
follows:

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.

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 accountant or 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 you are audited by
the IRS!

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 many deductions that are allowable for
your home business. The best way to get more information on tax
deductions and related information on income taxes is to go
online to 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.
 
To your success,

Charlotte Howard
WorkHomeAdvice.com