Home Office Tax Advantages

Jan 20, 10 Home Office Tax Advantages
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Costs Of Creating A Home Office

Setting up your own home office has its own start-up costs that you have to shoulder.  With that said, it is important that you invest in the equipment that you will use to operate your business.  This initial investment has the potential to yield tremendous profits depending on how well you run your business.

Financial management is vital in every business.  Therefore, many people are always for ways in which to reduce their start-up expenses and monthly overhead.  Here are some tips:

•When shopping for basic office supplies, look for possible rebates.

•Sign up for customer loyalty programs so you can qualify for discounts when shopping at a particular office supply store.

•Ask your family or friends if they have any office equipment that they no longer use.

•Scour Craigslist, local classifieds, and garage sales for great deals.  You can get useful equipments in good working condition at a bargain price.

Tax Benefits of Running a Home Office

Even utilizing these money saving ideas, smart business people will always seek ways to save money.  Self-employed individuals who run their own home office can find a few tax benefits that they can use.  This will help to alleviate some of the expenses that you have incurred starting and running your own business.  These tax benefits were enacted in an effort to encourage entrepreneurship and for individuals to create small businesses.

Your tax benefits begin with the recognition that your home office is a business expense.  However, you can qualify only for tax deductions if you are able to show government officials that you spend a substantial amount of your time working at home in order for it to be recognized as a working space.  Then, a given percentage is deducted from costs incurred with running business at your home.

Requirements for Tax Deductions

There are two basic tax requirements that a self-employed individual must meet in order to qualify for the tax benefits of running a home office.  These are:

1.)  A home office is a given space within your house, known as your home office, solely for business purposes.

2.)  You must be able to establish the fact that you use your home office as the principal place where you conduct business.  You must use your home office for either one of two things: meeting clients or customers, or you produce a separate structure in your house for business and work.

Taking Advantage Of Your Benefits

Since the savings potential for deducting your home office provides you major financial benefits, it is important that you meet the following stipulations.  These are essential in proving your home office’s validity as a business operation.

•  Identify the exact measurements of your entire home office space.  This is taken into account by tax officials in determining exactly how much of your tax percentage is deducted.

•  Make sure to have your business licensed by registering a business name and tax ID.  This certifies that your business operates legally and is recognized by law.

• Secure home office equipment.  If you conduct transactions within your home office, make sure you keep receipts as proof.

• If possible, have a separate phone line strictly for business purposes.

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