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6 Tax Tips for Home Office Business Owners

If you’re a small business owner with a home office, taxes can be a little more challenging than when you relied on your employer to take care of your W-2s. Taking advantage of ways to trim your tax liability is an important part of ensuring that your new business venture is the success you want it to be. WIth that in mind, we’ve compiled some basic home office tax tips to help you stay ahead of the tax game.

  1. Know What’s Deductible.

If you’re home office is currently your dining room table, you can’t use it as a deduction. In order to qualify as your home office tax deduction, it has to be a place that is used exclusively for your business, even if it’s a small area of a room. So if there is a way to turn a corner of the exercise or laundry room into your private office, than do it. Your home office is one of the most important tax deductions to include. In the past, a complicated percentage deduction was typically used, but now, the formula is $5 per square foot, up to 300 square feet total. So get working on that converting that spare bedroom now!

  1. Home Utilities.

Once you’ve qualified the space in your home as being a legitimate, tax-deductible home office, it’s time to look at those home utilities that are used to power that home office. Your heating and electricity bills can definitely be proportionately used as a factor of your deduction, as well as your wi-fi services and any dedicated phone lines you have for that home office.

  1. Don’t Forget the Office Supplies and Travel!

All that paper, toner, tape, paper clips and other office staples from Staples can all be included in your deductions, so make sure you’re saving all your receipts over the year for anything you buy that you’re using for your business. Traveling for business or driving to appointments? Save those airline ticket and hotel room receipts, and keeping a mileage log and pen in your glove compartment so you can quickly jot down miles driven to meet up with clients is a great way to ensure you get your proper deduction for mileage. Keeping your gas and lunch meal receipts all together with your mileage log will it much easier for your accountant when tax season rolls around, too, Since 50% of your meals can qualify as a deduction. And making a quick notation of clients met with and projects discussed on receipts when the meeting happens is a great habit to get into right from the start.

  1. Time for An Upgrade?

Looking to add some zing to your presentations with a color printer upgrade or make sitting at your home office desk a more comforting experience with a better office chair? Go for it, and make sure to give those receipts to your accountant at tax time, too. Keep in mind that when it comes to large home office purchases (like a printer or a new laptop), the deduction can be claimed in two ways: all at once, or as a Depreciation Deduction, which means the deduction is applied gradually over the life of the item; discuss with your accountant which deduction method would be best for you.

  1. Insurance.

If you’re self-employed and running your own business, it’s possible you can deduct the cost of the policy for you and your family. The best way to ensure you’re participating in a deductible health care plan is to discuss the policy with your accountant or business advisor first. If you decide that the costs of a health care plan is too expensive, know that participating in a spouse’s health care plan is NOT considered a deductible expense.

  1. Retirement Plan.

When you’re just starting out in your own business, you’re thoughts are focused on the present, and getting your business off the ground. However, it is always important to keep your future goals in mind, and putting savings into a tax-deferred retirement plan is one of the most solid ways to keep your taxes low. Getting your plan set up and contributing even the bare minimum will help your out when it comes tax time, and even the smallest contributions can add up quicker than you may think. Talk to your business advisor to find out what contribution you can afford, and which is the best plan for you and your tax liability.