|Real Estate Information|
Tax Advantages In A Home Business
Every year, several thousand people develop an interest in "going into business." Many of these people have an idea, a product or a service they hope to promote into an in come producing business which they can operate from their own homes.
If you are one of these people, here are some practical thoughts to consider before hanging out the "Open-for-Business" sign.
In areas zoned "Residential Only," your proposed business could be illegal. In many areas, zoning restrictions rule out home businesses involving the coming and going of many customers, clients or employees. Many businesses that sell or even store any thing for sale on the premises also fall into this category.
Be sure to check with your local zoning office to see how the ordinances in your particular area may affect your business plans. You may need a special permit to operate your business from your home; and you may find that making small changes in your plan will put you into the position of meeting zoning standards.
Many communities grant home occupation permits for businesses that involve typing, sewing and teaching, but turn thumbs down on requests from photographers, interior decorators and home-improve ment businesses to be run from the home. And often, even if you are permitted to use your home for a given business, there will be restrictions that you may need to take into consideration. By all means, work with your zoning people, and save yourself time, trouble and dollars.
One of the requirements imposed might be off-street parking for your customers or patrons. And, signs are generally forbidden in residential districts. If you teach, there is almost always a limit on the number of students you may have at any one time.
Obtaining zoning approval for your business, then, could be as simple as filling out an application, or it could involve a public hearing. The important points the zoning officials will consider will center around how your business will affect the neighborhood.
Will it increase the traffic noticeably on your street Will there be a substantial in crease in noise And how will your neighbors feel about this business alongside their homes
To repeat, check into the zoning restrictions, and then check again to determine if you will need a city license. If youre selling something, you may need a vendors license, and be required to collect sales taxes on your transactions. The sales tax requirement would result in the need for careful record keeping.
Licensing can be an involved process, and depending upon the type of business, it could even involve the inspection of your home to determine if it meets with local health and building and fire codes. Should this be the case, you will need t o bring your facilities up to the local standards. Usually this will involve some simple repairs or adjustments that you can either do personally, or hire out to a handyman at a nominal cost.
Still more items to consider: Will your homeowners insurance cover the property and liability involved in your new business This must definitely be resolved, so be sure to talk it over with your insurance agent.
Tax deductions, which were once one of the beauties of engaging in a home business, are not what they once were. To be eligible for business related deductions today, you must use that part of your home claimed exclusively and regularly as either the principal location of your business, or the place reserved to meet patients, clients or customers.
An interesting case in point: If you use your den or a spare bedroom as the principal place of business, working there from 8:00 to 5:00 every day, but permit your children to watch TV in that room during the evening hours, the IRS dictates that you cannot claim a deduction for that room as your office or place of business.
There are, however, a couple of exceptions we will note to the "exclusive use" rule. One is the storage of inventory in your home, where your home is the location of your trade or business, and approval for your business, then, could be as sour trade or business is the selling of products at retail or wholesale. According to the IRS, such storage space must be used on a regular basis, and be a separately identifiable space.
Another exception applies to day care services that are provided for children, the elderly, or physically or mentally handicapped. This exception applies only if the owner of the facility complies with the state laws for licensing.
To be eligible for business deductions, your business must be an activity under taken with the intent of making a profit. Its presumed you meet this requirement if your business makes a profit in any two years of a five-year period.
Once you are this far along, you can deduct business expenses such as supplies, subscriptions to professional journals, and an allowance for the business use of your car or truck. You can also claim deductions for home related business expenses such as utilities, and in some cases, even a new paint job for your home.
The IRS is going to treat the part of your home you use for business as though it were a separate piece of property. This means that youll have to keep good records and take care not to mix business and personal matters. No specific method of record keeping is required, but your records must clearly justify any deductions you claim.
You can begin by calculating what percentage of the house is used for business, either by number of rooms or by area in square footage. Thus, if you use one of five rooms for your business, the business portion is 20 percent. If you run you r business out of a room thats 10 by 12 feet, and the total area of your home is 1,200 square feet, the business-space factor is 10 percent.
An extra computation is required if your business is a home day care center. This is one of the exempted activities in which the exclusive use rule doesnt apply. Check with your tax preparer and the IRS for an exact determination.
If youre a renter, you can deduct the part of your rent which is attributable to the business share of your house or apartment. Homeowners can take a deduction based on the depreciation of the business portion of their house.
There is a limit to the amount you can deduct. This is the amount equal to the gross income generated by the business, minus those home expenses you could deduct even if you werent operating a business from your home. As an example, real estate taxes and mortgage interest are deductible regardless of any business activity in your home, so you must subtract from your business gross income the percentage thats allocable to the business portion of your home. You thus arrive at the maximum amount for home-related business deductions.
If you are self-employed, you claim your business deductions on Schedule C, Profit or Loss for Business or Profession. The IRS emphasizes that claiming business-at-home deductions does not automatically trigger an audit of your tax return. Even so, it is always wise to keep meticulously within the proper guidelines, and of course keep detailed records if you claim business related expenses when you are working out of your home. You should discuss this aspect of your operation with your tax preparer or a person qualified in the field of small business tax requirements.
If your business earnings arent subject to withholding tax, and your estimated federal taxes are $100 or more, youll probably be filing a Declaration of Estimated Tax, Form 1040-ES. To complete this form, you will have to estimate your income for the coming year and also make a computation of the income tax and self-employment tax you will owe. The self-employment taxes pay for Social Security coverage.
If you have a salaried job covered by Social Security, the self-employment tax applies only to the amount of your home business income that, when added to your salary, reaches the current ceiling. When you file your Form 1040-ES, which is due April 15, you must make the first of four equal installment payments on your estimated tax bill.
Another good way to trim your taxes is by setting up a Keogh plan or an Individual Retirement Account. With either of these, you can shelter some of your home business income from taxes by investing it for your retirement.
Copyright 2004 Joe Featherston
Your Resources For Home Base Success,
Office Set Up
OK, you say, Ive decided to start my business. I have my idea, my identity package, my licensing and zoning done. Now I need to set up my office.
Publicizing Your Company
Got a huge need for publicity and a tiny publicity budget You donít need to have a Madison Avenue-sized advertising budget to make your name known.
Jobseekers! Look For Smoke, Not Fire...
"If you always do what youve always done, you will always get what youve always received,Ē said some wise person. This is certainly true when it comes to job-hunting, especially during a "sucky" economy. How many times have you applied to a job on Monster.com Now ask yourself, "How many other people have applied for the same position" The numbers are discouraging I assure you. Should this keep you from applying to jobs online By no means, job boards are a necessary part of the process. However, if you limit your jobsearch to seeking only those jobs that you are qualified for then you are making a mistake. Am I suggesting that you do a "shotgun" effect with your resume and apply to as many jobs as you can hoping that by some miraculous twist of fate you catch a recruiters eye No... and yes, in a way.
Parenting and Running a Home-Based Business
An Ann Landers column "Parenthood is not a job for the weak at heart" caught my interest.
Obtain a Car Loan No Longer Than Necessary
Some time in your life you will need a new car. You may not want to have the burden of a new car debt, but you may find there are very few alternatives. There are some simple things you can look for that will help reduce the amount of money every month. Depending on your credit situation, a car loan can be very easy or rather difficult. Even though there are dealerships that specialize in selling people cars with bad credit, the purchaser must realize what they are getting themselves into.
Home loan applications made easy
You have finally found the home of your dreams. You have searched all over and are ready to purchase it. Before you even make your offer you should seek out the financing first. In some cases, it is easier to have a pre-approval in hand before making any financial commitment through a contract. Why get your hopes up after you purchase the home when you can buy with assurance and wait by the settlement table. Before you can buy anything, you will need to get accepted by a reputable lender. There is much you will need to know, as this will be the largest purchase you will ever make. You will need to fill out a mortgage application first.
Credit Cards For People With Bad Credit Scores
Sometimes life lands you in a situation that causes your credit to suffer. A job loss or illness can send your credit rating south leaving you with nothing to do about it. Some creditors may let you slide a month or two, but your records will still show a delinquency. A stolen identity can also leave you feeling violated and unable to resume a normal life with credit. It is during these times you may have to search a little harder to find companies that wan to deal with people who have bad credit. There are a handful of lenders who will help you re-establish your creditworthiness by using one of their credit cards.
Get Your Money For Nothing
Youve probably heard them all. You know, the "make $1,000 while you sleep without doing a lick of work" BS pitches. Well, let me tell you, it doesnt happen that way.
More Bang for Your Buck With Mortgages
Choosing a knowledgeable mortgage lender can make a difference in the quality of home you are able to purchase with your finances. I prefer to recommend a mortgage broker to my clients, because they usually offer 50 or more programs. Regular mortgage companies are usually locked into one source. Take time to research a mortgage lender. And, remember, creative financing can be the way to go if you need a higher priced home with more space.
Investing: The Art Of Making Your Money Work For You
There is a lot to know about investing. It all depends on what type of investing you are interested in as well. There are many different types of investment options out there. So what is investing, specifically
Disaster Decision - Do You Need Insurance
The expenses involved with owning a home can be overwhelming at times - routine maintenance, repairs, seasonal preparations, improvements. Not to mention taxes, fees, and all those monthly bills. Some homeowners, in trying to reduce their expenses, wonder if they really need disaster insurance.
Paralysis By Analysis
Every day we get emails and telephone calls from people who want to get started in Real Estate. We hear, I am just checking out your program. Or, Iíve been researching for the past six months to try and find a program. While researching and checking out programs is an important step, so many of these individuals never follow through to the next step, which is getting started and moving forward.
The Many Ways To Profit From O.P.P.s Multiple Cash Streams
In a previous article we introduced you to the concept of O.P.P., or Other Peoples Property.
Student Home Purchase Plan
Tuition costs are climbing, housing costs are climbing, it seems like all the costs for students are climbing these days. Students can afford cost increases less than any other demographic in Canada. Because of this, parents and students alike are looking for new ways to offset the costs of education.
The Smart Way To Look At Home Improvements
What home improvements really pay off when the time comes to sell your house
Five Reasons the Economy Will Crash and Will Stay Crashed
If the U.S. economy had to be summed up in one word, the word would be unsustainable.From entitlement programs to trade deficits, the U.S. economy cannot continue indefinitely on its current course.Sadly, changing course is difficult and political impossibilities are quickly giving way to mathematical impossibilities.The economy will soon come face to face with problems that cannot be solved and it will crash.The crash will be major and recovering from it will take many decades.
Should Bloggers be Helping Google Fix Their PageRank System
By now, most bloggers have heard the announcement that the Big 3 search engines - Google, Yahoo, and MSN - have united in support of a new tag that will supposedly combat comment spam. The new tag is a nofollow attribute that can be added to links. When added to links in comment tags, the search engines will ignore them.
In Business, Image Isnt Everything; Its The Only Thing!
We have all heard this lament, but how much do we practice it. With all the relaxed rules today, do we really present ourselves in the best light. It seems all the articles I see today are about how old fashioned todays workers find their supervisors or bosses to be in the way they dress, the policies they implement and the old fashioned ways in which they conduct their business.
Advertising Made Easy
How You Can Make Advertising Pay Big Dividends source: www.chetholmes.com
Why You Never Have To Pay Retail Prices For Anything - Ever Again
I step into my local mall, and into a leading top brand clothes store. I see a jumper I like and while feeling the soft material casually lift up the price tag - and I almost feint with disbelief. How much Thats more than I make in 2 days! I quickly stop caressing the fabric and head toward Big Als Unbranded Clothes Discount Centre for a sweater within my budget range which unfortunately will no doubt look as if it were knitted by my 5 year old Niece.
|home | site map|