As I scan around my home office, I see computers, printers, phones, Vitamin Water, pens, business cards, dust, books and a list of other items that many home office has. Then I spy my calendar and note that April 15th (deadline to pay taxes) is right around the corner!
So with this in mind we thought to help you understand and remind you how your home office relates to some tax savings you might find.
Whether you’re a homeowner or a renter, you can claim the portion of your residence that is devoted to your office on your taxes each year. While taxpayers have been reluctant to claim a home office in the past due to fears of an audit, it actually can make the process of claiming business expenses easier. Many tax experts now advise home-based professionals to claim a home office rather than run from it, saying it no longer triggers an audit as it once did. By claiming a home office, taxpayers may actually help legitimize their business, allowing them to justify other business-based deductions.
Claiming Business Expenses
Business expenses are essential to reducing an entrepreneur’s tax burden each year. Every ink cartridge, ream of paper, and electronic device being used to grow a business should be claimed as a deduction at the end of the year. When a home office is part of the equation, a professional can also claim every piece of furniture in that space. Desks, chairs, and even lamps can be claimed, just as they would be if the professional were setting up an office outside of the home.
In addition to the furniture in that space, a taxpayer can also claim expenses like phone or fax lines that have to be run to that room. In addition to the monthly cost of that line, professionals can claim installation and deposit fees and the cost of the phone or fax machine. When all of this is associated with the same home office, a professional’s deductions gain a greater legitimacy than if they were pieced together.
Tracking Business Expenses
Tracking every item throughout the year can be extremely time-consuming, taking a professional away from the work he needs to be doing. Solutions like Xerox’s eConcierge service automates the process of ordering supplies to save time and money. The service automatically detects Xerox equipment and monitors supply levels, automatically reordering as needed. The best part of this service is that at the end of the year, businesses can gather information on all supplies ordered throughout the year for easy tax collection. And that is simply amazing!
Numerous software solutions are available that streamline the tax preparation process for businesses. Professionals can scan receipts and save them electronically, with the information automatically populating their QuickBooks accounts. This one-step process eliminates lost receipts and ensures professionals never miss a deduction, as well as saving time throughout the year.
Professionals no longer have a need to fear the home office deduction. In fact, claiming an area of a home or apartment that is designated specifically for a home office can strengthen a professional’s other tax deductions, including office supplies and furniture. With all of this working together, a professional’s tax return shows that he is serious about the business he’s working so diligently to build from the comfort of his own home.
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Ramon Ray, Marketing & Technology Evangelist, Smallbiztechnology.com & Infusionsoft. Full bio at http://www.ramonray.com . Visit his Small Business Solutions Blog Author Page to get in touch on Google+, Twitter or Facebook.