Friday Feb 03, 2023

Home Business Tax Deductions For 2023 – Yahoo Finance

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home business tax deductions

Owners of home-based businesses can take advantage of a slew of tax deductions that will help them reduce their taxable income and save on income taxes. The home office deduction is a tax break, especially for home-based businesses. Other deductions are similar to those that other small businesses get to take. Making full use of tax deductions can help improve the after-tax profitability of home-based businesses and solidify your financial position. To get help with your home-based business taxes and other financial matters, consider talking to a financial advisor.

Deduction for Using Your Home as an Office

Deductions help reduce the taxable income reported by individuals and businesses and can reduce the taxes they owe as well. The home office deduction is unique to home-based businesses. Employees who use part of their home to work remotely for an employer can’t claim it. Businesses that aren’t home-based also don’t qualify. Not all home-based businesses have deductible home offices either. However, those that do can look forward to a potentially significant break at tax time.

The first requirement for a home office deduction is that the space for the office is set aside for exclusive use for the business. A room used part of the time as an office and part of the time as a spare bedroom doesn’t qualify.

The second requirement is that the office is the principal place of business. This excludes small business owners who have another office or other place of business outside the home where they do most of the work of running the business. If you frequently work outside the home visiting clients, however, you could still qualify for this deduction as long as you don’t have another office.

Home Office Expense Deductions

home business tax deductions

If you have expenses used only for your home office space, you can deduct those. For instance, if you pay an electrician to rewire a broken light fixture, you can subtract the bill from taxable business income for that year. If you do a major renovation or improvement, however, you will likely have to depreciate it and claim the deduction in small amounts over a number of years rather than all at once.

You can also deduct a portion of the repairs and ongoing operating expenses incurred by the entire house. The IRS permits two ways to figure the amount you can deduct. Both techniques are based on the size of the home office, so you’ll need to measure its dimensions and calculate square footage.

To use the direct method, you multiply the size of the office in square feet by $5. If you have a 250 s.f. office, your deduction would be $1,250.

The indirect method allocations a portion of the actual expenses incurred by the whole house to the home office. These expenses may include repairs, depreciation, homeowner’s insurance, utilities, telephone and Internet service, cleaning and the like

To use the indirect method, add up all your household expenses and multiply by the percentage of the house taken up by the office. If your office is 250 s.f. and the house is 2,000 s.f., the office takes up 12.5% of the house. If household expenses come to $8,000, multiply that by 12.5% to get $1,000. That, plus any …….

Source: https://news.google.com/__i/rss/rd/articles/CBMiT2h0dHBzOi8vZmluYW5jZS55YWhvby5jb20vbmV3cy9ob21lLWJ1c2luZXNzLXRheC1kZWR1Y3Rpb25zLTIwMjMtMTQwMDMwOTEyLmh0bWzSAVdodHRwczovL2ZpbmFuY2UueWFob28uY29tL2FtcGh0bWwvbmV3cy9ob21lLWJ1c2luZXNzLXRheC1kZWR1Y3Rpb25zLTIwMjMtMTQwMDMwOTEyLmh0bWw?oc=5

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