Tax Savings of Owning a Small or Home-Based Business
Whether you choose to turn a hobby or craft into a small retail operation, start on a network marketing business, or run a services-based profession from your home, once you enter the realm of business (full-time or part-time) you are now eligible for numerous taxable expenses that may be deducted from your regular and business incomes.
Click on the icon to open an Excel worksheet that you can personalize yourself and get an estimate of the amount of tax savings you may achieve for running a business from your home. Most regular employees do not realize the economic advantages of running a full or part-time business from their own homes, and therefore, pay the taxman way too much money every year. Here we discuss those advantages with a link to an Excel Worksheet Example.
Watch this video to get a full explanation of the tax benefits.
Most working stiffs can save thousands of dollars annually just by being in business, prior to even earning a dime from their new enterprises.
For example, if you use a vehicle in the course of running your small business, the tax code allows you to deduct a pro-rated share of the associated expenses to operate your personal vehicle. Items such as wear and tear (depreciation), gasoline, parking, car washes, repairs, insurance, licensing, and registration may be deducted from your total personal income used in calculating your tax owing.
In our example, an annual operating cost of $11,720 to run your car, if used only 80% of the time for business purposes, allows for a deduction of $9376 from your regular income. In a 41% top tax bracket, your net tax savings would be $2659 because you used your personal vehicle in an attempt to generate legitimate business income.
Perhaps another big example is the use of a dedicated space in your home for a home office. Let's assume that your mortgage, condo fees, utilities, insurance, property taxes, and repairs totaled $2185 a month and you set aside 25% of your home for an office (and some common area space), you could legitimately deduct $6555 from your annual income and save another $1859 in taxes.
When you add up other expenses like entertainment, travel, cell phone, internet, computers, educational material or courses, and office supplies, the net tax savings can be quite substantial.
Tax savings of over $7393 per year are possible compared to an employee-only situation.
A penny saved is a penny earned in business, so start a business from home and put those savings towards your investments if you want to begin creating wealth.
Visit the Links above for the downloadable Excel worksheet that you can personalize yourself and get an estimate of the amount of tax savings you may achieve by running a business from your home. Remember to always seek professional advice prior to claiming deductions on your tax returns.