Home Business Tax Deductions

Owning and operating a home based business can benefit moms who want to stay at home with their children while still contributing income to the household. Others like working from home because of the flexibility it offers. Regardless of the reason, working from your residence can result in home business tax savings that will result in a more favorable outcome at tax time.


How Much Can You Save on Taxes when Working at Home?

Tax time can be one of the most dreaded times of the year. The forms are difficult to understand and fill out, and the amount of taxes owed can be staggering. However, a home-based business can allow deductions that will reduce your tax obligations.

The use of your home as your place of business will more than likely be your primary deduction. A percentage of interest, utilities, insurance and the home's depreciation can be deducted. How much can be deducted depends on the percentage of space being utilized for the business activity. There are two requirements that the IRS requires before the deduction can be claimed. First, you must use the part of your home that is for business regularly and exclusively. Second, the part of the home used for work is the primary location for the business. A word of caution: if your business computer is used for any non-business related activity, the part of your house used for the home office cannot be claimed for any home business tax savings.

Many other home business tax deductions can be claimed. Be sure to save receipts and keep records of all items to be claimed.

Office expenses such as pens, paper, internet service, website subscriptions and even accounting software can be deducted.
Office furniture can be deducted at 100%, or a portion of the cost can be subtracted from income totals over seven years. This is considered depreciation.
Travel expenses are a deduction. Fifty cents per mile can be subtracted from income totals for driving to meet customers, business lunches and to do research. Airplane tickets and lodging expenses such as hotels, meals, and rental cars can be claimed as well.
Business phone lines and related expenses can be claimed as a deduction.
Research materials, trade magazines, and business reference materials are deductions.
Health insurance premiums can be deducted as well. Children and spouse premiums can be claimed if they work for the business.
These items alone can add up to a substantial total of deductions. It is estimated that an average of $2,000 to $10,000 can be saved on taxes each year if these items are claimed and filed.

You may work at home so your quality of family life can be improved, or you may work at home because you like the casual atmosphere and flexibility. These home business tax savings are just another advantage for the home-based worker. Claiming work space, office supplies, furniture, and travel expenses can add up to an impressive amount of deductions that will leave a smile on your face every April 15th.