There are many factors that will determine whether or not an individual qualifies for home based business tax deductions. Generally speaking, a qualified entrepreneur must be able to prove that part of their home is the main place of residence, and this area is regularly and exclusively used for running business. Furthermore, if you don’t have a separate dedicated space for home-based business within your house, then you’re not eligible to take home business deductions. On the other hand, if you have a home office that meets the requirements, but is separated from the home in any way, then you might qualify for a home based business deduction.
There are many ways to determine whether or not you meet the requirements for a home office deduction, one of which is for the exclusive use test. The exclusive use test consists of two basic elements: a need and an expenditure. In order to properly apply the exclusive use test, the expenses related to the home must be deducted. This means that you’ll have to come up with expenses that are directly related to your home office. You should keep in mind that an honest accountant will always offer you advice on which expenses you can and cannot deduct.
Generally, most business owners get sucked into the finance trap. They end up deducting costs that aren’t even real expenses. One of the most common finance errors small business owners make is deducting travel expenses as business travel expenses, even though the majority of these trips are for personal reasons. Finance companies are willing to help. There is a different method to calculate travel expenses, called the cost-effectiveness ratio, or CER, which can be used to calculate travel expenses. Many of these finance companies also offer advice on how to use the CER formula to maximize the amount of money that can be deducted from your taxes.
Another common business expense is postage costs. Whether you have mail that goes to your home or not, the stamps can wind up being added onto your tax bill, which can be a costly mistake. Some people get audited every year because of their stamp costs, but you can take steps to eliminate this expense by asking your post office for a bulk rate or by purchasing stamps online. If you can buy in bulk, this can save you a lot of money in postage costs.
Home office deductions are available if the employee uses a personal computer in the home for the purpose of business. This exclusion excludes the home office itself, which can be deducted. Business phone expenses can also be deducted. For a home office deduction, there are certain criteria that must be met. For a start, the home must be the primary residence of the business owner.
There is one other expense that can be listed here and that is the cost of travel and travel related expenses. If the business is conducted primarily out of state or out of country, then the cost of travel to and in between cities can be considered home-based. If it is out of state, then the costs of travel to and within cities is considered a business expense. Some people call this the “business jet fare” and it can be claimed under the home-based business deduction. The rules are very specific and Edwards’ tax expert says there are times when this can apply and when they will not.
In conclusion, when you look at what Bob Edwards says about home-based businesses, he makes it sound pretty simple. All you have to do is follow the rules and get your business done. You don’t have to worry about anything. The reality of the situation is that there are so many people who try to take care of everything and the end result are usually disaster. They end up frustrated and they quit.
You should always try to keep your tax returns as accurate as possible and you should make every effort to maximize your home-based business use of expenses. If you need a computer and all the extra expenses that go along with that, then buy it and use it only for business use. If you want to get rid of all the extra expenses and just use the computer to get work done, that is fine too. If you follow Bob Edwards advice, you should end up being much happier with your tax return and with your finances in general.