Travel Expenses

Tax Breaks for Home-Based Businesses

Home-based business owners may not be aware that there are many ways to cut their tax bill. Many tax breaks are available for home-based businesses, here are some tips for taking advantage of these allowable business expenses.

Business structure

Sole proprietors must pay self-employment taxes. Forming a corporation or another business entity like an LLC and electing to treat it as an S Corporation may help reduce self-employment taxes. S Corporations allow home-business owners the opportunity to pay themselves a “reasonable salary” and treat any remaining profits as a profit distribution, both of which are not subject to self-employment taxes.

Deduction Thresholds And Bunching Expenses

All of us as taxpayers continually think we have a lot of expenses that we can itemize and deduct to help reduce our respective tax bills. But they come, they go, all for naught and no effect. The problem usually arises from the fact that our costs regularly fall just short of the required income thresholds for some categories of deductions. One solution is “bunching expenses,” which is a term used to describe incurring as many expenses as possible in a particular category during a particular tax year. Of course, doing this in one tax year will usually significantly diminish any chance of repeating it the following year.

DEDUCTING TRAVEL EXPENSES RELATED TO YOUR JOB

Everyone at one time or another has wondered about deducting their work-related expenses from their income in order to pay lower taxes. Especially those expenses related to travel, whether these trips and excursions are to and from work or out-of-town. Federal law, specifically the Internal Revenue Code (“Tax Code”), allows individuals to deduct qualifying business expenses. What, if any, of a working taxpayer’s expenses related to travel are deductible as a business expense under the Tax Code?

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