TurboTax Home Business Tax Tips
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TurboTax 2018 Tax software helps home-based business owners understand the tax breaks they need to pay attention to with the inevitable end-of-year financial tax preparation tasks for running a business from home.
When filing your taxes as a self employed home business owner, the task can be far more complicated than those required when you collected a paycheck from your employer.
However, there are a whole bunch of tax breaks that can help you shrink your taxable income.
10 Tax Tips For Running a Business From Home
1) Setting Up Your Home Business Entity Structure
When filing taxes as a sole proprietor, you're required to pay self-employment taxes. However, forming a corporation or an LLC (with “S Corp Election”) could reduce self-employment taxes. With an S Corporation, you can pay yourself a “reasonable salary”; with remaining profits taken as a profit distribution (which are not subject to self-employment taxes).
2) Moving In, Getting Your Home Office Up To Snuff
Getting set up to be comfortable and efficient can mean
spending plenty of otherwise profits to insure future
profitability has a chance to grow! Success is often tied
directly into efficiency so a new desk, filing cabinet, office
chair, computer, printer, fresh coat of paint, new carpet, and
other office furniture may be needed. These allowable home
business tax deductions can help you settle in for success.
There are a couple ways to claim these deductions, all in a lump sum the year you purchased them, or depreciated gradually over the life of the property you reside in. Property Depreciation Publication 946
3) Deducting Your Home Office Square Footage
Your home office, or home business space must be an area that you legitimately use for your business activities exclusively. The home-based business tax deduction allows owners to use a simple method to calculate $5 per square foot, up to 300 sq. ft. for a home business space tax deduction.
Use Form 8829 for Home Business Expenses including upgrades.
4) Home Business Utilities Deduction
The square footage portion of your home used for business is also used to determine the portion of utility bills that's deductible. This can include portions of your internet access, heating, electricity bill and more. Be reasonable with your portions!
5) Home Office Business Supplies
Need a new computer or iPad? Got to pick up some paper, printer ink toner cartridges, postage stamps, pens and paperclips, etc. these can be fully deductible (provided you use them for business only). However, if you use any of it for personal non business use, you must determine the percentage used for business only. See Publication 535 for Deducting Business Expenses
6) Home Business Travel Expenses
Is your business flying high? Did you attend a seminar, conference or business meeting away from home? These costs and related fees are deductible expenses. Here’s some deductible examples:
- Hotel room lodging, conference room, tips, etc.
- Meals, 50% on business days
- Travel Entertainment Gift and Car Expenses Publication 463
- Transportation (taxi, airport parking, rental car, plane ticket, bus fare, etc.)
7) Automobile Expenses, Business Commuting, Deliveries
Traveling to meet a client or for work outside your home is tax deductible. This can include picking up business supplies, conducting research, or other job related activities. This may include a mileage deduction, public transit fares, toll fees, and parking permits.
8)Taking Clients Out For Lunch
Only 50% of business meals are deductible, not the whole thing. Save a receipt and jott down the date, client’s name, and a few notes on the back about business matters that were discussed.
9) Health Insurance Tax Credit
For individuals who are self-employed (including sole proprietors), you may qualify for the Health Coverage Tax Credit (HCTC) to deduct the cost of your health insurance premium for yourself and family members. Publication 535 Business Expenses
10) Deducting Your Retirement Plan
For self employed taxpayers, a tax-deferred retirement plan is a great way to save for the future and lower your taxes at the same time. Form 5305-SEP. You can set up a SEP-IRA for each eligible employee.