Thursday, May 3, 2012, AM | 2 Comments
If you are self-employed or work from home for an employer, you need to meet the requirements from IRS that the home business operator must face. If your home office qualifies for tax benefits, you may be able to deduct a percentage of your real estate property taxes on your home, mortgage interest, utilities, etc.
Home Office Gains
If you used a portion of your home for business, you can deduct a portion of your expenses, but you may also be losing out on an even bigger tax benefit.
Under current tax rules, the gain on the sale of your home could be completely tax free. However, if you have used a portion of your home for business and claimed the depreciation deduction on that portion, that business portion of the gain will not qualify for exclusion from income and will be taxable.
So, if you live in a home where real estate values are climbing, you may lose out on a significant gain exclusion when you sell your home.
Put Your Children To Work
If you are self employed or have a side business, you could consider hiring your child to perform tasks for which they are qualified in your business.
By paying your child a reasonable wage for their work, you can to deduct the wages as an expense from the business income. Your child can then use the money to purchase the clothes, shoes, and entertainment you may have eventually paid for anyway.
Generally, your child may have total earned income up to $5,800 without having to pay any tax of their own. The key though, is they must actually perform some labor or service of value and the compensation must be appropriate for the task
IRS Publication 334
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Child employed by parent. You are not subject to SE (Self-Employment) tax if you are under age 18 and you are working for your father or mother.
Are You Going The Extra Mile
If you are going the extra mile to volunteer for a charity, you can deduct out of pocket expenses such as the cost of gas and oil.
One example would be trips from your home to the charity. Your out of pocket expenses are deducted with your normal cash contributions.
If you do not want to keep track of your actual expenses, you may opt to claim a deduction using the standard mileage rate of $.14 per mile.
You may be able to deduct at least a portion of your vehicle’s license fee as an itemized deduction.
If your state bases a portion of your vehicle license fee on the value of the automobile, that portion is deductible as a tax.
The portion of the vehicle license fee based on weight, model, year, or horsepower, however, is still not deductible
In a Nutshell