Just a little more than two weeks and then the year will be gone. If you’re looking for a quick fix to a tax problem, look to your business! Or, if you don’t yet have a business, it’s not too late to start your own home based business.
To start a business, and have a legitimate one in the eyes of the IRS, you’re going to have to prove that it is real. That means you have a profit motive and that you run it like a real business with good books and records. If you’re not yet making a profit, you need to be able to show that you are making changes so that you will some day make a profit. You’re hiring good advisors, taking classes, making changes, tracking your progress, whatever it takes to push the business to the next level. In other words, you’re taking care of your business.
Regardless of whether your home based business is an MLM, consulting firm, affiliate marketing company, or any of the other thousands of possibilities for business, you have a great source for business deductions. Unlike investments, a business loss is fully deductible against your other income. So, don’t be afraid to wrack up the legitimate business deductions.
A business deduction is something that is “ordinary” and “necessary” to the production of income. So, if you have a business as a screenwriter, going to the movies is a deduction. If you have a business as a DJ, iTunes charges are deductible. But, as a CPA, I normally can’t take a deduction for going to the movies or buying music. (I can, however, buy music to play in my office and take a deduction for it.)
Your home office, as long as it is a space that is exclusively and regularly used for business is deductible. So is your furniture, computer, ISP, desk, chair, filing cabinet and everything else in that space that is used for business.
When you go to the local coffee shop and get a latte and a bagel to eat at your desk, the cost of that is 100% deductible. That’s because you’re now working for the “benefit of the employer.” If you get a meal to eat at your desk during lunch – same thing – 100%.
And don’t forget the use of your auto for business purpose, travel, paying your kids for work in the business – the list goes on.
In fact, it’s more of a question of what do you spend money on and how could it be a legitimate business deduction?