Let me start by saying that I’m not a tax epxert. I’ll also add that I don’t like doing my taxes because as a home business owner, I find that they are little more complicated than when I had a job. But the rewards outweigh the work it takes to decipher the tax booklet’s instructions (they’re in English and yet it frequently feels like a foreign language).
I think everyone, whether they want to work-at-home full time or not, should have a home business simply because of the tax savings. Home business owners are eligible for deductions such as:
- Portion of mortgage or rent.
- Portion of utilities.
- Portion of Internet access.
- Some phone services.
The above list are thing you’re already paying and with a home business get an additional deduction.
Further, you can deduct business related expenses including mileage, professional dues, marketing costs, supplies, trainings, and more. In a job, you often incur fees in several of these areas (i.e. commuting) but can’t deduct them. But in a home business you can.
The other advantage is that in a home business, you pay taxes on income you earn AFTER subtracting your expenses. This doesn’t happen at a job. In a job, you pay your taxes on your gross income. But with a home business, you can subtract your business expenses from the gross, and pay your taxes on the net. For example, if you earn $1000 per month and pay 25% in taxes, at your job, your taxes are $250. But if you have a home business earning $1000 per month, and your expenses are $200, you pay taxes on $800 which is $200. That’s a TAX savings of $600 per year.
To learn more about tax advantages of having a home business, check out the IRS’s guides.
