Take advantage of the Home Office Deduction

by John on March 22, 2010


The deduction for the home office for your business is one many people don’t utilize either because they are not aware of it, think it is too complicated because of additional forms to file with their tax return, or just don’t understand it.

For network marketers and others who conduct their business from home, this deduction allows people who meet certain requirements to deduct from their income a portion of their home expenses that would not normally be deductible.

These include:

* Utilities
* Repairs
* Maintenance
* Home insurance
* Rent
* Mortgage interest
* Real estate taxes

While mortgage interest and taxes are deductible in most cases if you itemize your deductions, deducting the portion allocated to your office as a business expense also saves paying the 15.3% self-employment tax on business income. In addition, these deductions are available to people who do not itemize their deductions. Specifically, if you are renting your primary residence, the odds are that you are not itemizing and filing Schedule A.

In order to qualify for the home office deduction, you must meet a few simple requirements. These are:

* The office must be the primary office for your business. Unless you have another office for this business, this will not be an issue.
* The area you are claiming for your home office must be used exclusively as your office and not for personal use

The other big benefit to claiming a home office deduction is that you are able to depreciate your office. Unlike the other expenses listed above, taking a deduction for depreciation invloves no out-of-pocket expense. This deduction would not apply to those renting.

I recommend a visit to the IRS website and download Form 8829 and look it over. Next time I will talk about depreciation – what it is and how it can work for you.

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The Importance of Good Documentation

by John on March 15, 2010


Many people don’t utilize all the great tax deductions they are entitle to because either they aren’t aware of them, or they are worried that they might raise a “red flag” at the IRS. Certainly, the more you use the benefits granted in our complicated tax law, the more review your tax return may receive. However, if you keep good records, it is not that hard to protect yourself from audits.

There are thousands of dollars paid in taxes unnecessarily by individuals every year because they are scared of the power of the IRS. Make no mistake, the IRS is very powerful. While you may be innocent until proven guilty in our court system, the opposite is true when dealing with the IRS, but once you are aware of exactly what the government requires, it is a simple matter to protect yourself.

In order to keep good records that comply with IRS rules and regulations, you will need to have a good tax diary to keep you organized, and you need one that makes it easy to document your deductible expenses. There are many diaries on the market, such as Day Timer and Day Runner; but these are essentially appointment calendars. You can also easily buy an automobile expense log at any office supply store. If you use these types of logs, you will also need a separate diary to keep track of your out-of-pocket deductions including things such as meals, travel, entertainment and other business expenses. Before you panic at the thought of keeping all of this stuff straight, there is another solution. This is a comprehensive tax diary no larger than a normal pocket calendar system.

The first step in lowering your taxes safely and legally is to visit the Tax Reduction Institute. Under the section of Tax Saving Products, you will find the Tax Diary. It is available in either a Pocket Size or a Mid-Size Edition. This system will make it easy to document expenses and prompt you to enter all of the relevant information required by the IRS.

If you enter the coupon code “taxman” at checkout, you will receive a 10% discount on your order.

My next blog topic will cover a deduction overlooked by many network marketers and home-business owners to start saving money right away: the deduction for an office in your home.

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Welcome to My Tax Tips Page

by John on December 30, 2009


I encourage comments and questions, and will do my best to help everyone coming here to keep more of their hard-earned money by not overpaying the government.

Taxes are the single biggest expense most people have. If you combine the amounts people spend on all of the different taxes, including Federal and State income taxes, sales taxes, Social Security taxes, Medicare taxes and more, the average taxpayer spends a whopping 41% of their income paying taxes.

If you use the information I will be giving you here, I promise that you will be amazed at the amount of money you will save. Don’t believe that your accountant or tax preparer “takes care” of your taxes. They will only work with the information that you give them. On this page, you will learn what to give them.

Welcome to the world of less taxes – for real!

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