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.

8 Tax Tips for Small Business Entrepreneurs

Congratulations! Whether you finally decided to stop procrastinating and open that small business you’ve been talking about forever or you’ve been running your own side hustle for a few years, you deserve hearty kudos for taking a risk and living a dream many of us have but few ever do. Being a small business owner has significant rewards, but it also comes with some drawbacks and pitfalls you must be aware of if you’re going to succeed. One of those areas is how to ensure you are maximizing your tax savings with some basic yet important strategy. A recent study published in Forbes Magazine indicated that as much as 93% of small business owners overpaid their taxes annually. (Forbes, April, 2018). Here are some tips we’ve put together for to help you take advantage of tax savings for the small business entrepreneur.

  1. Mileage.

If you own a small business, chances are that you are doing a great deal of the necessary travel yourself. All those rides to the airport or to drop off a package add up. Make sure you are keeping track of any mileage you incur for your business by using mileage tracker, and then remember to provide those to your tax accountant. Even if you’re using your personal vehicle, those miles add up, and could be a hefty deduction when the time comes.

  1. Home Office.

If you are running your business out of your home in an area of the house that is used only for your business (a dedicated home office), you are eligible for a home office deduction. This cut gives you a $5 deduction per square foot up to 300 feet.

  1. Going Green.

If you’re implementing sustainability initiatives in your business, you should keep track of what you’re doing and do a little homework on what type of tax credits are available to reward your efforts. For example, if you’re using a hybrid vehicle for your business, you might qualify for the IRS Plug-In Electric Drive Vehicle Credit. Do a little homework on this topic and as your tax accountant for more info.

  1. Insurance.

If you have set up an insurance plan for yourself or your employees, the premiums you pay for this insurance might be tax deductible, as well as other insurance premiums you pay to protect your business. Make sure you factor these in when tax times comes.

  1. Keep Careful Records & Receipts.

Keeping any receipts related to business – like travel, meals, entertainment, supplies, etc. – is especially important. The IRS allows for 100% of business related travel to be deducted and 50% of meals and entertainment, but due to abuses of this deduction in the past, it’s important to make sure you err on the side of OVER documenting. Your receipts should include all the obvious information (date, time, amount and place of expense) but also note on the receipt who/what the meal was for and the purpose of the expense. For travel expense, make sure you ask the hotel for an itemized bill at checkout. Having all this information ready to go when you meet with your accountant at tax time will make things much easier and faster.

  1. Save Your Cash.

Many entrepreneurs look at business profits and assume they need to spend their cash to avoid a big tax bill. Don’t fall into the trap of spending a dollar to save fifty cents. If you really NEED a new printer, computer, etc. than buy it, but don’t spend money just because you think it will help you avoid the bill from Uncle Sam. Don’t forget that taxes are the cost of doing business, and if you’re paying them, that means you’re making money, which is why you started out in the first place.

  1. Save for Retirement.

It may seem like something you can put off, but starting picking the right retirement plan and starting to develop it is something that smart entrepreneurs do. Ask your tax advisor about which plan is right for you. These days, many entrepreneurs are looking at opening an SEP-IRA, thanks to it being cheap to open, and its’ high contribution limit (which is all tax deductible). Ask your advisor about which plan is the right fit for you.

  1. Invest in Professional Software.

This may seem like a no-brainer, but investing in today’s business software is a terrific way for small business entrepreneurs to avoid headaches and make sure they are on the right track when it comes to tax time. QuickBooks is the leader in this race for a reason. It’s user friendly interface and organizational metaframe are unmatched. If you need some help getting off the ground with it, contact your tax advisor and see if they have a Certified QuickBooks Pro on the team. We do here at EPA!