When it comes to business, past performance is no guarantee of future revenue or profit results BUT when it comes to taxes, past performance is a great indicator of the types of deductions that businesses typically take each year. If you are like 30% of small business owners in El Paso, TX that work out of their home you would probably enjoy a good well deserved tax break, right? In this quick article Perla Diaz, from Blue Pearl Bookkeeping and Tax Services in El Paso, shares with us 4 Home Based Business Tax Deductions You Don't Want to Miss!
One of the biggest advantages of running a home based business is that there are additional income tax deductions that you can claim compared to being employed or working out of a coworking space or office space elsewhere. What follows is not meant as an exhaustive list but rather four of the most common Texas home based business tax deductions. How many of these apply to you?
Home Based Business Tax Deduction #1 - Automobile Expenses
Many El Paso home based business owners use their personal cars as business vehicles. Using your car is ok! Besides deducting the costs of fuel and oil, licensing, insurance and maintenance and repairs as a home based business owner; you can also “deduct any interests on money you borrowed to buy your vehicle, automobile, or passenger vehicle you use to earn income”.
*There is a limit to the amount of interest you can deduct on money you borrow to buy a passenger vehicle.
*You can also deduct the cost of leasing a vehicle that you use to earn income.
Tax Tip: As you can deduct only a portion of your automobile expenses when you have a vehicle that you use for both business and personal use, the IRS recommends that you keep a record of the total kilometres you drive and the kilometres you drive to earn income to “support your claim”. There are now plenty of Mobile Apps that allow you track your mileage and seperate their usage. Our favorite is MileIQ --> check it here.
Home Based Business Tax Deduction #2 - Insurance
You can deduct all regular commercial insurance premiums you incur on any buildings, machinery, and equipment that you use for your business. El Paso Home-based business insurance is essentially commercial in nature and is entirely separate from a person's home insurance.
*In fact, if you are running a business out of your home and don’t have home-based business insurance, you’re running the risk of not being covered at all if something happens, because running a home business that your insurer is not aware of may invalidate your home insurance policy.
If you need to get your accounting and bookkeeping in order, talk to a UTEP graduate, Perla Diaz. Perla has been helping El Paso's small businesses for over a decade. Call your El Paso, Tax Preparer at (915) 996-3981 today.
Tax Tip: You may also write off a portion of the cost of your home insurance if your home- based business meets certain conditions for claiming business-use-of-home expenses - if you have any questions contact Blue Pearl Bookkeeping & Tax Services.
Home Based Business Tax Deduction #3 - Home Office Expenses
Even if your "office" is just your counter in the kitchen, your El Paso home-based business will have business expenses to claim. The trick here is to distinguish between office expenses (you know, things like pens, stamps and notepads, paper clips, dedicated computer or ink and depreciable assets such as desks, printers, and other equipment, for further items and considerations Perla Diaz is there for you.
Just how you hire a marketing agency for lead generation, your business depends on areliable bookkeeper and tax preparer to help you stay up to date with IRS laws and regulations as well as make sure you retain more of your hard earned money.
Because depreciable assets wear out over time, you can only claim a portion of their original cost as a tax deduction each year. How much you can claim as a tax deduction depends on what the asset or property is; the Income Tax Regulations have divided depreciable assets into different classes with different percentage rates.
Tax Tip: You don't have to claim this allowance in the year that it occurs; rolling it forward can be a good financial strategy to lower your taxes later on when you can use it to offset a higher income. This a clever way on how to reduce tax expenses every year, but only certified and expert bookkeepers can provide you with this sort of expertise.
Home Based Business Tax Deduction #4 - Mortgage Interest & Other Expenses
If you are paying your mortgage on your home and running a home based business, you may be eligible to claim your mortgage interest under the business use - assuming your business meets certain requirements.
Most business owners know that you can claim a portion (typically a bedroom turned office) from your mortgage costs as an office business expense, so I won't spent too much time on that. But, did you know that there are other items around the house that can be claimed as well for your El Paso Home based business? Consider:
- Heat or A/C
- Lights / Electricity
- Water / Sewage
- Maintenance and Structural Repairs
- Cleaning materials or service
- Internet connection
Remember though, you can't just claim whatever expense you incur during the year. Many businesses get in trouble with the IRS because of these type of deductions, but for a professional these are nothing more than ordinary - you can take heavy losses if you try to figure this our yourself or simply ignore this opportunity to save more on taxes OR you can simply call a local tax preparer to help you with this and significantly increase your profit margins for the year.
If your business is not tax preparation or bookkeeping then you should probably hire an expert to help you with this. Consider that running a business is something that should be taken seriously if you want your company to grow and succeed and one of those sustainable approaches to running a business is to leverage others' expertise so that you can focus on what YOU do best.
Call Perla Diaz and her El Paso Team For All Your Business Bookkeeping needs at
(915) 996-3981 or visit her website to learn more at www.BluePearlTax.com
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