7 Tax-Saving
Tips for Home-Based Businesses
Maui Hawaii
Tips for Home-Based Businesses
Maui Hawaii
Filing taxes for your home-based business on Maui Hawaii doesn't have to be a daunting process. Here's how to maximize your return.
Filing taxes for your home-based business doesn't have to be a daunting process. Here's how to maximize your return.
April 15 will be here before you know it. And while it might already be too
late to limit what you'll owe Uncle Sam for your 2010 taxes, it might be just
the perfect time to start thinking—and actively planning—for ways to save on
the taxes you'll pay on your home-based business in 2011.
late to limit what you'll owe Uncle Sam for your 2010 taxes, it might be just
the perfect time to start thinking—and actively planning—for ways to save on
the taxes you'll pay on your home-based business in 2011.
True tax planning gives you concepts and strategies needed to minimize your, it's the key to your
financial defense. As a business owner, you have two ways to put cash in your
pocket: Financial offense is making more; financial defense is spending less.
Taxes are probably your biggest single expense. So it makes sense to focus your
financial defense where you spend the most.
One way to get your 2011 tax planning off to a good start is to hire a tax
consultant, someone who can both map out the latest IRS changes and explain ways to help you
prepare for them. In the meantime, however, here are some tax-saving tips that
you can get started on right away.
financial defense. As a business owner, you have two ways to put cash in your
pocket: Financial offense is making more; financial defense is spending less.
Taxes are probably your biggest single expense. So it makes sense to focus your
financial defense where you spend the most.
One way to get your 2011 tax planning off to a good start is to hire a tax
consultant, someone who can both map out the latest IRS changes and explain ways to help you
prepare for them. In the meantime, however, here are some tax-saving tips that
you can get started on right away.
Tax Tip 1: Get Organized
Good tax planning begins with getting organized—particularly when it comes to keeping good
records about the things you spend money on for your business. It's critical
that entrepreneurs ensure that we take advantage of every tax situation. That
means treating receipts like cash, not trash, she says. Think about it: each
$100 business expense receipt could be worth up to $50 when it comes time to
filing your taxes, depending on your tax bracket. To keep track of those expenses, Winston recommends carrying a receipt envelope with you in your purse, car, briefcase, backpack,
or wherever works best for you. Then, as you make purchases for your
business—whether it relates to buying paper for a copier, picking up a lunch
tab for a customer, or buying plane fare to attend a trade show—you can simply
place the receipt into the envelope. As the envelope fills up, you should then
transfer the receipts to your accounting file.
records about the things you spend money on for your business. It's critical
that entrepreneurs ensure that we take advantage of every tax situation. That
means treating receipts like cash, not trash, she says. Think about it: each
$100 business expense receipt could be worth up to $50 when it comes time to
filing your taxes, depending on your tax bracket. To keep track of those expenses, Winston recommends carrying a receipt envelope with you in your purse, car, briefcase, backpack,
or wherever works best for you. Then, as you make purchases for your
business—whether it relates to buying paper for a copier, picking up a lunch
tab for a customer, or buying plane fare to attend a trade show—you can simply
place the receipt into the envelope. As the envelope fills up, you should then
transfer the receipts to your accounting file.
Tax Tip 2:
Calculate Your Start-up Expenses
Calculate Your Start-up Expenses
If 2011 is the year that you've finally decided to become your own boss, then you might also
have the opportunity to deduct the money you're spending to get things off the
ground.
have the opportunity to deduct the money you're spending to get things off the
ground.
Once you're running a business, expenses such as advertising, utilities,
office supplies, and repairs can be deducted as current business expenses—but
not before you open your doors for business. The costs of getting a business
started are capital expenses, you may
deduct $10,000 (up from $5,000) the first year you're in business; any
remainder must be deducted in equal amounts over the next 15 years.
office supplies, and repairs can be deducted as current business expenses—but
not before you open your doors for business. The costs of getting a business
started are capital expenses, you may
deduct $10,000 (up from $5,000) the first year you're in business; any
remainder must be deducted in equal amounts over the next 15 years.
The rub is that in order to take the deduction, your business actually needs to be losing money.
If you are profitable from the get-go, you may be able to work around this rule
by delaying paying some bills until after you're in business, or by doing a
small amount of business just to establish an official start date.
If you are profitable from the get-go, you may be able to work around this rule
by delaying paying some bills until after you're in business, or by doing a
small amount of business just to establish an official start date.
Tax Tip 3:
Maximize Your Home-Office Deductions
Maximize Your Home-Office Deductions
Home office expenses are probably the most misunderstood deduction in the entire tax code. For
years, taxpayers feared it raised an automatic audit flag. But Congress has
relaxed the rules, so now home offices attract far less attention."
years, taxpayers feared it raised an automatic audit flag. But Congress has
relaxed the rules, so now home offices attract far less attention."
For a home office to qualify for deductions, though, it must meet the following criteria:
You must use the office exclusively and regularly for administrative or
management activities of your trade or business.
management activities of your trade or business.
You have no other fixed location where you conduct substantial
administrative or management activities of your trade or business.
administrative or management activities of your trade or business.
Claiming a home office lets you deduct the "business use percentage" of expenses such
as mortgage interest or rent, property taxes, utilities, repairs, insurance,
garbage pickup, and security. Plus, you'll get to depreciate part of your
purchase price.
as mortgage interest or rent, property taxes, utilities, repairs, insurance,
garbage pickup, and security. Plus, you'll get to depreciate part of your
purchase price.
Tax Tip 4: Deduct Your Health Insurance Costs
Self-employed
entrepreneurs can now deduct the cost of their health insurance both for
themselves and for their families. The catch, however, is that the tax benefit doesn't apply to those with a secondary business and a full-time job in which their employer provides for a subsidized health plan. Those with spouses that have an employer-subsidized health plan
are also disqualified from the tax deduction.
entrepreneurs can now deduct the cost of their health insurance both for
themselves and for their families. The catch, however, is that the tax benefit doesn't apply to those with a secondary business and a full-time job in which their employer provides for a subsidized health plan. Those with spouses that have an employer-subsidized health plan
are also disqualified from the tax deduction.
Tax Tip 5: Track Your Mileage
Car and truck expenses are easy to overlook. That's because you can take a standard mileage
allowance but that allowance is the same for all vehicles, no matter how big
they are, how much they cost, or how much gas they guzzle." In other
words, even if you take the standard deduction, you might be short-changing yourself.
That's why it's worth keeping track of your actual expenses as a way to compare
with the standard deduction.
Here's the difference for 2011:
allowance but that allowance is the same for all vehicles, no matter how big
they are, how much they cost, or how much gas they guzzle." In other
words, even if you take the standard deduction, you might be short-changing yourself.
That's why it's worth keeping track of your actual expenses as a way to compare
with the standard deduction.
Here's the difference for 2011:
- Actual expense method: You keep track of and deduct
all of your actual business-related expenses. - Standard mileage rate method: You deduct a certain
amount (the standard mileage rate) for each mile driven, plus all
business-related tolls and parking fees. In 2011, the standard mileage
rate is $0.51 per business mile driven, an increase from the $0.50 per-mile
rate in effect for 2010.
The newer your
car, the more you might benefit from using the actual expense method,
especially because you also deduct depreciation on it. But, as with the
deduction you can take for home-based expenses, you can only deduct the portion
of your vehicle(s) that you use for your business, which means you need to also
keep track of how much you use it for business as compared to personal errands.
car, the more you might benefit from using the actual expense method,
especially because you also deduct depreciation on it. But, as with the
deduction you can take for home-based expenses, you can only deduct the portion
of your vehicle(s) that you use for your business, which means you need to also
keep track of how much you use it for business as compared to personal errands.
Tax Tip 6: Pay
Yourself
Yourself
Home-based entrepreneurs sometimes forget to pay themselves by setting up an IRA or other
retirement vehicle, which allows you to put pre-tax money toward your
retirement. Even if the monthly amounts start out small, you will be surprised
how soon you have built a nice account, with the advantage of a tax deduction.
retirement vehicle, which allows you to put pre-tax money toward your
retirement. Even if the monthly amounts start out small, you will be surprised
how soon you have built a nice account, with the advantage of a tax deduction.
Tax Tip 7: Hire Your Family
Another tax-saving idea is to hire your child or a child who lives in your neighborhood- for your
business. Since any child can earn up to $5,700 tax free you can deduct their wages
as a business expense. Write up a job description, cut them a company check
every pay period, make sure to fill out a W-2, Plus your child learns about
responsibility and earning a paycheck.
business. Since any child can earn up to $5,700 tax free you can deduct their wages
as a business expense. Write up a job description, cut them a company check
every pay period, make sure to fill out a W-2, Plus your child learns about
responsibility and earning a paycheck.
For more information and related services on Maui Hawaii
Please visit our Website or connect with us on your social network – www.NewStartMaui.com
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