Home Business and Taxes - OurFinanceGuide

The first few years of a business are the most important for tax purposes.

You can write off a percentage of your home payment and utilities if you use part of your home as an office only. You must figure out the entire square footage of your home, then the entire square footage of your office space and arrive at a percentage of the home that the office space takes up. That percentage can be written off.

Using the cell phone is a more complicated write off as you must keep a written record of what calls were personal calls.

While the cell phone is more handy, a separate land line used only for the business is easier to write off.

For automobile expenses written record must be kept of start and stop mileage, gas etc. What part was business what part was personal. Again a percentage is used. Repairs, insurance and gasoline costs must be kept in a written record.

Whenever you are discussing business you may be able to write off the trip to the person with whom you are speaking. No need to say, a written record should be kept of who it was you spoke with and about what aspect of the business.

Because these write offs can and sometimes are abused, you will want to spend a small amount of cash on a tax consultant. They will save you money in the long run as well as keep you out of audits and trouble.

Being a small business, you will likely be a sole proprietorship. The tax rules for a sole proprietorship are quite advantageous to you, as you have seen above.

If you wish to incorporate there are advantages to that, but in my opinion, when just starting out, you will want to save money and keep it simple as a sole proprietorship.

Copyright 2007 by Ian RoeBuck