The Holden Team's Blog
You generally pay taxes year round. Unless you’re taking advantage of a special deal, you pay taxes with each purchase that you make. Taxes are added onto your cable and utility bills. And, of course, taxes are deducted from your income.
You pay enough taxes, start saving with home office deductions
Work out of a home office as a small business owner and you could be responsible for reporting and paying business sales tax. Another situation when you’ll pay taxes if you work out of a home office is if you work as an independent contractor. Generally, clients won’t deduct income taxes from payments that they make to you.
In addition to paying income tax, as an independent contractor, you are responsible for paying Medicare and Social Security taxes. These taxes are typically paid to the IRS once a quarter. The start of the year is a time when you can take home office deductions, saving yourself from paying more taxes.
Home office tax deductions you could qualify for
The type of home office tax deductions that you can take depend on the type of business that you operate out of your home. If you travel a lot as part of your business, create a log to track your mileage. Also, keep a list of client and prospect names for people you conduct dining business meetings with.
Here is a list of some home office tax deductions that you might be eligible for. As with any tax deduction, check with the IRS or an experienced and certified accountant before you take the deductions.
- Mileage – You could deduct mileage that is related to business trips. Keep a log of each trip, including where you went and the reason for the trip (i.e. ABC client year end meeting).
- Utilities – A portion of your home office utilities could qualify as a deduction
- Rent or mortgage – If you use a part of your home solely for business purposes, you could receive a tax deduction for the space
- Health insurance – As an independent contractor, you may pay for your own health insurance. You could deduct your health insurance premiums off your taxes
- Marketing and advertising expenses – This includes online and offline marketing and advertising
- Home office supplies – Computers, copiers,papers, etc. are types of home office supplies that you could deduct
- Shipping and handling – Keep your postage receipts, as they could be deducted
Take the right home office tax deductions
Operating a successful home office business is not cheap. Marketing, advertising and product development expenses can run into hundreds or thousands of dollars a year. If your business has attracted lots of interest, you could spend a sizable portion of money on shipping and handling and customer service support.
Be a smart business owner and file home office deductions that you are legally eligible for. Doing so could keep you from paying hundreds or more in taxes that you don’t legally have to pay. Protect yourself by keeping copies of receipts,including business related entertainment expenses, for at least seven years.
Keep an electronic and a print copy. If you aren’t sure whether or not you qualify to take a home office tax deduction, check with a certified accountant, someone who has experience filing taxes for independent contractors or small business owners. The official IRS website is another great resource to use to learn which home office tax deductions you qualify for. It is at the official IRS website where you can also find and download reporting forms like the Schedule C.