I use a portion of my home for business and I can deduct a portion of my utilities, home improvements, and purchases pertaining to the business from my taxes. To keep my records easily accessible throughout the year I use a free wine box with 12 compartments that I pick up in the liquor store. I label each section Jan-Dec and put the receipts and paid bills for that month in it. Come tax time, I can easily retrieve everything I need.
By Susie from Hammonton, NJ
My husband and I are planning on starting our own business as well and I was wondering...for tax purposes do we have to use that part of the house as just business or would it be okay if it was in the living room or something of the kind.
Also if you have any more practical advice for someone starting their own business on limited money, please let me know. You can leave it on here or email me at jeggie _ tomato at yahoo dot com taking out spaces, etc. If emailing then put in the subject that you heard of me from this site.
Thank you so much for your help!!!
It must be a part of the house exclusively set aside for business. You need to measure the area and then the whole house and whatever percentage of the house that is you can deduct that percentage of rent, house payment or utilities. They will ask on your tax return if the space is used exclusively for business. It's best to set aside a room or den for that purpose to get the best write off.
You can also write off business equipment, supplies, advertising, furniture, etc. It's good to set up a separate checking account for the business. Business accounts normally cost more but depending on what you are doing, it may be important.
When starting a business, start up costs an be very expensive. The newspaper and phone book yellow pages will try to sell you ads. Depending on what type of business it is, will make a lot of difference in what you will need to start. Buy used as much as possible and don't spend a lot on printed materials. You will end up probably wanting to change them a lot in the beginning so it's not practical to have a bunch printed up which will just need to be thrown away.
Make sure that you get a business license and pay any state fees. The small business administration has a lot of good advice on their site. A business plan is important just to get you planning. It's also important if you plan to get any bank or SBA loan financing.
Good luck with your new business. If you let me know more the type of business you are starting, I might be able to help you more. You can just click on the Thrifty_Fun at the top of this post and there is a place where you can send me a message.
Susan from ThriftyFun
If you file with Intuit Turbotax, it will ask you the total of all our household bills that are also used for the business, and then automatically apply the % of space you use (exclusively) for the business to those bills, and end up with the deduction you can take. If you use it off your mortgage also, it does what's called depreciation, and can affect how much you get to keep tax free from selling the home.
Thanks for the info. I think that will help alot. We are trying to start promoting Christian concerts in our area. Our first is the Kingsmen, a Southern Gospel group, along with a local group, and 2 soloists that were a part of the group in the past, in Sept 07. We are hoping to get one a year to start off with, both Southern Gospel and Contemperary as well as Christian speakers, then moving to 2/more a year. We have talked about becoming incorporated and doing it nonprofit but we've since been told that it's just a lot of paperwork and not worth the time and energy. If you have anymore input please let me know.
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