As a home-based business owner, tax time can be nerve wracking. If you are getting ready to file taxes for your first time with a home business, you may be wondering where to start. Before you try to do your taxes on your own, there are a few things that you should know. Here are a couple of things to keep in mind.
Make Sure Your Home Office Is Deductible
Make sure that your home office qualifies for the deductions on your taxes. To do this, you have to have a clearly designated space that's used solely for your business efforts. It cannot be used for anything unrelated to the business. The Internal Revenue Service publishes a rate per square foot for deductions so you can calculate the amount easily based on the square footage of the space.
Don't Overlook The Utility Bills
If you qualify for the home office deduction, you can also write off some of the utility bills you pay every month. Your electricity and your home's heating and cooling costs are the primary bills that you can deduct as part of this. If you pay for broadband service at home for work, you can often deduct a portion of that cost as well.
Your utility bill deductions are calculated according to the square footage of the office space. Determine the square footage of the space you're using for your home office and divide it by your total home square footage to find out the percentage of your home that it makes up. Then, deduct that percentage of the utility bills on your small business tax forms. As far as your internet bills, be realistic about how much of it is used for business because it's likely used for personal purposes, too.
Keep Supply Receipts
When you're buying supplies for your home office, keep all of the receipts. You can deduct the cost of things like ink, toner, paper, tablets, computers, and anything else that's dedicated to the business. Just make sure you have documentation of all of the expenses so that you can prove their legitimacy if you're audited.
These tips will help you to get the most out of your first tax filing with your home-based business. If you're looking to capitalize on your deductions, talk with a local business tax service that can help you find all of the credits and deductions you qualify for.