Why You Should Have a Home Business
Home Business Tax Benefits
Most people hate paying taxes. That’s true even among those who rightly understand that the government uses that money to provide essential services that work to benefit everyone. That’s nice in theory, but when it comes time to pay, we all hate paying taxes. While we’d all like to pay nothing if we could, we do acknowledge that paying something is always going to be necessary. How much you pay, however, is a variable amount of money. We have a progressive tax system in the United States; the more money you earn, the higher the percentage of your income you’re going to pay in income taxes. What many people overlook, however, is that income isn’t the determining factor in how much you pay. What matters, come tax time, is the net income you pay.
Many taxpayers simply use their favorite tax preparation software or hire a preparer to do their taxes for them. They pull out their W2 form from their employer and then they use the numbers on that form to determine how much they’re going to pay in taxes. Some taxpayers go a bit further, looking for deductions such as the interest they pay on their mortgage or the allowable deductions for dependent children.
taxpayers, if not most of them, are paying more in income taxes than they need to. Again, it’s not the income that matters; it’s the net income, and the more you can take in deductions, the lower your net income and thus, the less you’ll have to pay in taxes. How can you increase your deductions and lower your taxes?
Easy. You start a home business. By starting a home business, you’ll perhaps earn a bit of money and maybe have a little fun, as well. In addition, you’ll also be able to deduct a lot more in the way of expenses, and in many cases, you’ll be able to deduct some or all of the costs of things you routinely pay for, such as electricity, gasoline, telephone, or Internet service. While these things are not deductible expenses if you’re simply living in your home, they may be deductible if you’re running a business there.
Let’s suppose, for instance, that you enjoy going to neighborhood garage sales, yard sales, or tag sales. You just think it’s a fun thing to do, and you do it regularly just for the fun of it. Some of the things you’ll see at such sales may not be of interest to you personally, but they might be things that you could resale online, perhaps by selling them on eBay. Instead of just buying things you like and passing them on to others, you decide to start buying things at these sales to resell online. You’re doing the same thing you’ve been doing all along, but now you’re buying a few more things than you ordinarily would resell them on eBay, and you do just that and make a little bit of money. What else will that do for you?
Well, if you didn’t have a computer, you’d need one to connect to the Internet and list those things for sale on eBay. You’ll also need Internet service. If you have to buy a computer, that’s a tax deduction. If you already own one, then you can depreciate it. Your monthly fee to your Internet provider is now also a deductible expense. If you’re using a spare bedroom as an office, you can deduct a percentage of your normal home expenses, such as your mortgage payments, insurance, utilities, maintenance, and more. Since you’re driving around the neighborhood to find those yard sales, you’ll be able to deduct a portion of your automobile expenses, repairs, insurance, and gasoline, commensurate with the amount of the vehicle’s use for your business. Even with a modest business selling a few things online, you can accumulate a few thousand dollars in additional tax deductions each year and over time, these things can add up to substantial savings on your taxes.
The beauty of owning a home business is that it can very much be a part time endeavor. After all, selling things on eBay isn’t all that time consuming, provided you’re not listing hundreds of things at a time. And that’s only an example; there are many other things you could do from a home office in the way of an online business that would qualify you for thousands of dollars in tax deductions. Just do a Web search for “online business” or “home based business” to get some ideas. You’re not looking for a full time occupation, though many people do work full time from home. You just want a part time gig that will allow you to take advantage of the tax laws that will legally permit you to deduct various home expenses as legitimate business tax deductions.
Hundreds of thousands of Americans do this, and it’s completely legal. Obviously, there are rules and laws that need to be followed, and you many need to consult with a tax professional in order to ensure that you’re compliant with the law and to make sure that you’re obtaining all of the deductions to which you are legally entitled. After all, taking deductions is the point, so if you’re going to the trouble of starting a home business, you want to make sure that you’re deducting everything you’re entitled to deduct.
Click here to see how to save the most on your taxes
In the end, paying taxes is partly about how much money you earn but it’s also partly about how smart you are. The choice is yours – you can simply do what most people do, fill out the forms and hand over a big chunk of your income to the government without giving it a thought. Or you can be smart, take advantage of the laws that legally allow you to take extra deductions, and pay less in taxes because you’re both smart and resourceful. Starting a home business doesn’t necessarily involve a lot of work, but it will produce tangible financial rewards. Why not be smart and do that?
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