Tax Advantages of Basing Your Business in Your Home

A Home Business Article Contributed by Elizabeth Fox-Wise

There are Many Advantages to a Home Based Business, One of Them is the Tax Benefit.

As every owner of a home based business will soon find out, basing your business out of your home brings many tax perks from the IRS. Therefore, a small home based business owner, must have a good tax accountant that will help them to take full advantage of these tax deduction.

Basically, from the Minute You Start Your Home Based Business, Just about Everything You Spend Money on is a Tax Write Off

If you use your home as the base for your business, some of your personal expenses can be converted into tax deductible business expenses.

One example of this is your home based business office. When your business qualifies you for a home office deduction, you can deduct all office furniture, equipment and supplies that the business purchases. For example if you do not have a home based business and you purchase a new computer system for $1, 000 - the complete cost to you is $1, 000. However, if that computer is purchased for a home based business' use, the IRS - through tax deductions - contributes approximately $300 to that computer purchase.

What Other Tax Advantages Exist for a Home Based Business.

On your taxes, you will be able to take a percentage of your household expenses under the deduction of "business use of your home". Lets say, for example, that your total home is 2, 000 square feet in size and you use 400 of those square feet for your home based business, this means that 20% of your home is being used by your business. Therefore, the IRS allows you to deduct 20% of home expenses. This includes home improvements as well as operating expenses such as electric bill, heating bill, etc.

If the improvement is done to the area of the home which is used exclusively by your home based business, then the cost of that improvement would be 100 percent deductible.

Having a qualified home based business also allows you to take deductions on your car and transportation. The expenses of commuting to a job are not tax deductible, however, any trips taken during the course of conducting business, are deductible for the home based business owner. The IRS will compensate the business owner, through tax deductions, at the rate of 31 cents a mile.

This adds up to a booming tax deduction for those home based businesses that spend a fair amount of time on the road, such as home based businesses that do "route work" like vending or those who spend a lot of time traveling to clients to do active sales.

In addition to these tax breaks, depending on the nature of the home based business, there may be others for which your business qualifies such as; meal deductions if you conduct business with clients over dinner and even meal deductions just for yourself if the nature of your business keeps you away from home forcing you to take your meals on the road.

Home based business owners should always check with an accountant to be sure you are getting full benefit of tax deductions allowed for your business.