Do you own a small business? If so, you don’t want to miss this article on CNBC. Take a look!
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Small-business tax rule No. 1: Don’t mess with the IRS.
But that doesn’t mean you should cheat yourself. Take every legal deduction you can. Here are a dozen that even savvy small-business owners and entrepreneurs sometimes forget:
1. Home office
Concerned that claiming a home office deduction is tantamount to sending an engraved invitation to an Internal Revenue Service auditor? Don’t be, says Jan Zobel, author of “Minding Her Own Business: The Self-Employed Woman’s Guide to Taxes and Recordkeeping.”
“I don’t agree that chances of getting audited are greater with a home-office deduction,” says Zobel, a San Francisco Bay-area tax expert who specializes in serving the self-employed. The key is that you use the term “home office” the same way the IRS does. The tax agency says it must be a space devoted to your business and absolutely nothing else. Deducting the den that houses the family computer and serves as a guest bedroom won’t fly with Uncle Sam.
“If you only have one computer and you have a child over four, the IRS is going to be pretty certain that the child is using the computer,” says Zobel. “And the burden of proof is on you.”
The deduction, however, isn’t limited to a full room. Your home office can be part of a room. Just how much of the space is deductible? Measure your work area and divide by the square footage of your home. That percentage is the fraction of your home-related business expenses — rent, mortgage, insurance, electricity, etc. — that you can claim.