Commercial building rent can be expensive for
a new business, causing many entrepreneurs to start their businesses from
their homes. What many home-based business owners may not know is there are
several tax deductions provided by the IRS they may qualify for. Every tax
deduction you can qualify for will help you save money on your tax bill.
Continue reading to learn about tax deductions for your work-from-home
Home Office Space
No matter if you are a homeowner or a long-term renter, you could qualify for the home office deduction. The requirements for this deduction are:
- Regular and exclusive use, meaning the space you use to operate your business must only be used for conducting business.
- Principal place of business, meaning the space must be used exclusively and regulated for management and administrative activities for the business.
- The simplified option is multiplying the square footage of your dedicated business space by the IRS rate of $5 per square foot. You can get a deduction on up to 300 square feet of space.
- The more complex option is valuing your dedicated office space by measuring the amount of expenses your space utilized based on your home's overall expenses. A few examples of expenses you can deduct are mortgage/rent, mortgage interest, repairs, utilities, and insurance.
You can receive tax deductions on most of the items you have purchased for your dedicated business space. Business supplies can include office furniture, pens, printer paper, printer ink, staples, and more. While these are all physical supplies, you can also include costs related to intangible supplies, such as website subscription feeds.
If you use an accountant, consultant, or lawyer, the fees you pay for their services can be tax deductions. All fees
associated with your business's accountant or any consultants you have worked
with are fully tax deductible. As for lawyers, any fees paid for ordinary and
necessary business purposes are fully tax deductible, but legal fees paid for
business asset acquisitions are not tax deductible.
If you have spent money on advertising, whether it's digital advertising, printing business cards, or paying for a radio commercial, you can receive a tax deduction on the associated costs. You can also deduct any costs you have spent on sponsoring events or teams.
Banking and Credit Card Fees
Banking fees for your business accounts can be used as a tax deduction, including fees for opening accounts, late fees, and ATM fees. Credit card fees such as annual credit card fees, late payment charges, and transactional fees associated with credit card processing on customer payments.
Any expenses related to a company vehicle are completely tax deductible, including car payments, depreciation, insurance, and gas. If you have a personal vehicle that you also use for business purposes, you can deduct a portion of your vehicle expenses that are related to your business use. To do this, you need to keep a record of the portion of time that you are using your vehicle for business purposes.
If you would rather use a tax deduction based on mileage, you can use a standard mileage rate of $0.575 per mile. To use this method, you need to keep track of your mileage used on business activities.
Navigating the world of tax deductions for business owners can be difficult to do alone. With an advisor from Genesis Financial on your side, you will be able to take advantage of all the tax deductions you qualify for. Tax planning is not only meant for tax season, so schedule your consultation today.