Tax deductions are just one reason among many that a home based business can be attractive. With a home based business you may quite properly and legally have the business carry expenses that also benefit you personally as long as they serve a legitimate, primary business purpose. Legitimate business expenses can do double duty as expenses that might be considered purely personal if you were simply an employee of someone else’s business. Personal expenses that you have to pay in any case become deductible as business expenses and you have sheltered your income from unnecessary taxation.
For example, if you use a room of your home exclusively for business purposes, you can deduct (or write-off) all of your costs associated with that portion of your home. These expenses may include maintenance and repairs, rent, mortgage interest, homeowners insurance, power, heat, water, and property taxes. The same is true for vehicle expenses to the extent the vehicle is used for business purposes Deductible expenses include insurance, gas and oil, maintenance and repairs, car washes, license and registration, and loan interest as well as taking a depreciation deduction for the declining value of this business asset. In order to take advantage of business tax deductions you must actually own and operate a legitimate business that produces income.
The IRS won’t permit attempts to write-off expenses associated with hobbies nor will they allow you to write-off amounts in excess of taxable business income. Remember, the tax laws are sometimes complicated and each home based business is unique. Consult with an accountant, attorney or qualified tax advisor to ensure that your returns are properly prepared.