10 Tax Tips for Owners of a Home-Based Business
When you file taxes as a solo business owner, things are more complicated than those days when you may have a received a tax form (T4) from a single employer. However, you've also got plenty of opportunities to trim your tax bill.
1. Deduct your Home Office
To qualify your home office as a legitimate business expense, it’s got to be a place that is used exclusively for business activities. If your kitchen table doubles as your work desk, you won't be able to deduct it. But, if you've got a dedicated room for an office, or even a portion of a room, you'll be able to deduct some of your housing costs. Look at the square footage of your office area and divide that by the total square footage to find the percentage of the housing costs that you can deduct as a business expense. This percentage can be applied to the rent expense, the mortgage interest paid, and the property taxes paid for the “office space”.
2. Home Utilities
3. Office Supplies
4. Travel Expenses
· You can deduct any transportation costs (plane tickets, bus fare, taxis, airport parking, rental car)
· You can deduct your lodging and tips
· You can deduct 50% of your meals for business days
Also, keep in mind that if you have an out-of-town business day on Friday and one on Monday, you’re also allowed to deduct your lodging and meal costs from over the weekend too!
5. Automobile Expenses
6. Taking a Client out to Lunch
7. Upgrade your Office Space
8. Health Insurance
10. Don’t Cheat or Lie
If you have something to hide, consider making a correction sooner rather than later. The onus is on you to show you have not understated your income, or overstated your deductions or credits. If you can't do that, you may face a penalty of 50 per cent of the taxes you owe.
Worse, if there was a willful intent to cheat the government, you will be charged with the crime of tax evasion. The penalty can be up to 200 per cent of the tax evaded, plus interest and gross negligence penalties too — and in severe cases, jail.
Final ThoughtsIf you have any questions or concerns, it’s always best to consult with a tax professional. There’s no reason you should have to pay more than you're supposed to. If you have any questions, or wish to discuss your personal tax situation, please feel free to call us today. We would love to help you with your personal tax situation.
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