Small Business Owners: Basic Tax Information You Need to Know, Part 3

Now that you know, and may slightly understand, the expectations that the Internal Revenue Service has for business owners, consider the following tips when it comes to home-office deductions. According to SCORE Counselors to America’s Small Business, you should consider the following when preparing your taxes:

1. Take advantage of every legal opportunity to reduce your taxes. Recent changes in the law benefit business owners who use their homes as an administrative and management base but work at other locations—such as plumbers, general contractors and health-care professionals.
2. Ask your tax professional to analyze your business regularly so you don’t miss important deductions.
3. Document deductible items. These usually include such costs as computers and other equipment, telephone charges, furnishings, and pro-rated portions of rent, utilities, home insurance and homeowner association fees.
4. If you are a homeowner, discuss with your tax advisor whether or not to take a depreciation deduction for the office space. Sometimes it pays; sometimes it doesn’t.

For detailed information, visit the Internal Revenue Service Web Site, http://www.irs.ustreas.gov/, and download IRS Publication 587, Business Use of Your Home.

Source: SCORE Counselor’s to America’s Small Business