The simple answer to this question – do home business owners have to pay taxes – is an unequivocal YES. But rather than curse Uncle Sam, consider all the surprise deductions you’re now eligible to receive as a home business owner, many of which you probably didn’t know about!
The most common tax deductions a home business owner will face come from the computers, peripheral devices, hardware, software, and supplies used to run the business. The important thing about these tax deductions for home based business owners is that they can be deducted at full cost.
Additionally, you can deduct your telephone or internet bill, and all the services that have a direct relation to your business. All these deductions are considered legitimate by the IRS, so you can enjoy quite a number of benefits when it come to filing your tax returns for claiming them.
If you are in a business that requires you to travel, then you can easily claim the expenses incurred during travel as a business expense on your income taxes. You just have to keep a track record for the number of miles that you travel in your car or hired vehicle, your tickets, fuel receipts, bills for vehicle servicing etc. There is a specific percentage that will be issued on tax returns on these miles. In addition to this, you may write the hotel accommodation expense and food purchases while traveling as legitimate expenses.
Home based business owners generally use a specific room in their home for business to conduct their work. This is another opportunity to file for more deduction! You may get a credit for a certain percentage of the house rent or the house payments, the utilities like electricity bill and water supply bill, the services of the cleaning person or cook, and all similar things.
You should keep in mind that you have to provide a proof of all the deductions that you will select. However, generally, the IRS understands that there has to be a sufficient space for work in the house to conduct business and so there are usually few hassles.
Keeping all your business receipts in a separate file will make tax time much easier. Find a system that works for you to keep these receipts organized (the shoe box doesn’t work!) and if you’re new to filing business taxes, then hire an accountant who has experience with home based business expenses and deductions. The penalties for filing erroneous tax returns can add up quickly so hire a professional to avoid those additional fees.
As you have seen, there are quite a number of deductions to be made for a home business owner and you will be outright surprised at the number of deductions you can make on your tax returns. Staying organized and hiring a professional tax preparer will help your business save money at tax time.