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Getty Treat receipts like cash, not trash. April 15 will be here before you know it. And while it might already be too late to limit what you'll owe Uncle Sam for your taxes, it might be just the perfect time to start thinking—and actively planning—for ways to save on the taxes you'll pay on your home-based business in As a business owner, you have two ways to put cash in your pocket: Financial offense is making more; financial defense is spending less.
Taxes are probably your biggest single expense. So it makes sense to focus your financial defense where you spend the most. In the meantime, however, here are some tax-saving tips that you can get started on right away.
Get Organized Good tax planning begins with getting organized—particularly when it comes to keeping good records about the things you spend money on for your business.
Then, as you make purchases for your business—whether it relates to buying paper for a copier, picking up a lunch tab for a customer, or buying plane fare to attend a trade show—you can simply place the receipt into the envelope. As the envelope fills up, you should then transfer the receipts to your accounting files or to the many software or online programs, such as Shoeboxed.
For a more high-tech solution, consider downloading Capturengoan app for the iPhone that allows you to create IRS-approved digital receipts using your phone's camera.
Calculate Your Start-up Expenses If is the year that you've finally decided to become your own boss, then you might also have the opportunity to deduct the money you're spending to get things off the ground.
According to Nolothe online legal advice site: Once you're running a business, expenses such as advertising, utilities, office supplies, and repairs can be deducted as current business expenses—but not before you open your doors for business.
The rub is that in order to take the deduction, your business actually needs to be losing money. If you are profitable from the get-go, you may be able to work around this rule by delaying paying some bills until after you're in business, or by doing a small amount of business just to establish an official start date.
Calculating Start-up Costs Tax Tip 3: Maximize Your Home-Office Deductions Home office expenses are probably the most misunderstood deduction in the entire tax code, says Beidle.
You must use the office exclusively and regularly for administrative or management activities of your trade or business. You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Claiming a home office lets you deduct the "business use percentage" of expenses such as mortgage interest or rent, property taxes, utilities, repairs, insurance, garbage pickup, and security.
Plus, you'll get to depreciate part of your purchase price, says Beidle. Deduct Your Health Insurance Costs Self-employed entrepreneurs can now deduct the cost of their health insurance both for themselves and for their families, says Ryan Himmel, a CPA and the founder of BidaWizan online marketplace for professional tax and financial advice.
The catch, however, is that the tax benefit doesn't apply to those with a secondary business and a full-time job in which their employer provides for a subsidized health plan. Those with spouses that have an employer-subsidized health plan are also disqualified from the tax deduction, says Himmel.
Track Your Mileage Car and truck expenses are easy to overlook, says Beidel. That's why it's worth keeping track of your actual expenses as a way to compare with the standard deduction.
According to Nolo, here's the difference for You keep track of and deduct all of your actual business-related expenses.
Standard mileage rate method: You deduct a certain amount the standard mileage rate for each mile driven, plus all business-related tolls and parking fees. The newer your car, the more you might benefit from using the actual expense method, especially because you also deduct depreciation on it.Feb 18, · To ease the burden at tax time, small business owners should remember to deduct the employer-equivalent component of their self-employment tax.
Business owners can claim half of what they pay in self-employment tax as an income tax deduction, so /5(50). Getting a business off the ground takes time, and the IRS recognizes this.
In your first few months or year of operation you may not bring in any income. An alternative to the single-step income statement is the multiple-step income statement, because it uses multiple subtractions in computing the net income shown on the bottom line.
The multiple-step profit and loss statement segregates the operating revenues and operating expenses from the. Itemized Deductions vs. Above-the-Line Deductions -the-line deductions can also refer to business deductions and losses. For example, a business expense reduces your net business income, which therefore reduces your total income.
you’re better off taking an expense as a business deduction whenever possible. Not only is it an above-the. The self-employed health insurance deduction is a personal deduction. This means it doesn’t reduce your business income for self-employment tax purposes.
There are a . Apr 27, · “Clarity is the most important characteristic of good business writing,” says Mignon Fogarty, creator of the “Grammar Girl Quick and Dirty Tips for Better Writing” podcast.