My Experience with Tax Advantages has been Beneficial
Over the years I have learned alot about creating income from an entrepreneurial perspective. I have learned and shared alot of experience on the difference between earning employment income.
The purpose of this blog post is to explain the tax advantages that are available when starting a home business, as well as the tax benefit for those who have a full-time career.
I have personally operated a number of successful profitable part-time home businesses and every year I enjoyed the many tax advantages that were not available to me with just my full-time employment income.
When my home business was part-time, the expenses I incurred allowed me to claim against my full-time working income as a tax advantage. Lets take a look at my experience and through this understanding how you can also take advantage of it.
The Purpose of Taxes
In most countries tax laws are designed to benefit businesses and not individuals. As an Employee, you pay tax that is deducted by your employer (state, provincial and federal income tax) and you also pay taxes when you purchase goods and services on a day-to-day basis including some foods, household expenses, rent, utilities, fuel for their vehicle, etc.
Business Tax Advantages Are Not Well Known
One of the most significant benefits you can enjoy as a home based entrepreneur is the ability to claim expenses and reduce your overall taxable income in a calendar year…just like any other business.
The home based business model that I have found the most enjoyable and flexible is a network marketing business as it gives you the opportunity to enjoy all the benefits this business has including numerous tax deductions. The thing is that many people do not understand this excellent business model or the tax advantages.
What are the Deductions?
I am not an accountant or tax adviser. I can speak on personal business experience as well as tax advise I have received over the past 18 years related to my home business and full-time working career.
What we do know for sure is that the government allows you to claim tax deductions for the initial start-up investments you make to start your business. As well as your computer, your phone and internet expenses are also to be included for tax deductions.
- Home Office Deductions
- Home Repairs & Maintenance
- Home Expenses
- Transportation Expenses
- Communication Expenses
- Meals & Entertainment Expenses
- Travel Expenses
You can claim a percentage of the rent or mortgage costs for the space you use to operate your business such as a spare bedroom that is used as an office.
Your home business qualifies for the home office tax deduction, but only if part of the home you use for your business is exclusively used for business (such as the spare bedroom).
If you use your kitchen or living room is used as your office then you will not be able to claim it as a tax deductions, as these spaces are used for other personal reasons as well.
To maximize your tax deduction as an office expense assign a room that you will exclusively run your home office from. You will also find this much better in managing your time, staying focused and getting the most advantage from an organization standpoint resulting in increase success in your business.
Many of the repairs and home improvements can be tax deductible as well. If you rent your home or apartment you are allowed to deduct a percentage for the portion of your home used exclusively for business purposes.
As an example, lets say you own your home so the government allows you to claim a percentage of your mortgage interest paid for your home. If your home is 2000 square feet house and you have designated a 200 square foot bedroom as your home office, this would allow you to write off 10% of your mortgage interest (or rent if you are renting).
To track and record here is the spreadsheet I use.
The government tax laws will also allow you to write off a percentage of personal home expenses including cleaning supplies, snow removal, home insurance, home security, electricity and other utilities all as business expenses. The percentage that you can write off is similar to the home office deduction explained above. So basically in continuing with our example you can write off 10% of your home expenses for business purposes.
Any home based entrepreneur has a requirement to leave the home to conduct business activities. The tax laws allows you to write off the transportation expenses you incur for business related traveling, like traveling to and from meetings. Be sure to keep good records of your activities by recording the odometer of your vehicle before and after making your business trip.
Here in Canada, Canada Revenue Agency considers the first phone line in your home as a personal expense however you can claim a percentage if it is your only line. You are allowed to claim tax deductions for any additional phone lines, including cell phones used for business purposes and internet service.
Many entrepreneurs will incur expenses to provide lunch or entertainment to your prospective clients. The tax laws allow you to get up to 50% tax deductions on the cost of meals and entertainment, but keep good records and save receipts.
One of things I like most about the network marketing profession is the ability and freedom it affords to enjoy travel.
You can enjoy the freedom of travel for business to conferences, training events, luxury vacations and claim the costs of your flight, hotel and any meals that you need to eat while out of town. This is only deductible for “business related travel” however it can be a significant deduction.
There are alot of Advantages
As you can see running a home based business can provide you with a lot of tax advantages and deductions that otherwise does not exist when just working as an employee.
These deductions can be beneficial regardless if you are a full-time or part-time entrepreneur. You will want to keep track of all your receipts and expenses in an organized system such as an expense report.
This is the spreadsheet I use on a monthly basis to keep track of my business expenses.
Now is the Perfect Time to Start a Business
Now is time to get started in your business and take advantage of the many tax advantages.
The significance is that you can claim your investment against your full-time working Employment income with your full start-up investment, likely claiming a business loss in your first calendar year…therefore reducing your total overall income taxes paid for the year.
This strategy will set you up to be in a great position to maximize your current year income tax situation and prepare you for the years following. In some cases, depending on your salary, you may even enjoy a refund from the government from $2,000 to $5,000 depending on your income tax bracket.
Why Pay More Taxes…?
Starting this now gives you the eligibility to claim your start-up investment in the same calendar year, thereby giving you a tax benefit on your salary. Putting it off will reduce your tax benefits on a prorated basis. So why wait?
Lets get you started today!
The investment is 100% Tax Deductible.
Contact me RIGHT NOW! (506) 856-9258