I am wanting to develop a side business doing cakes and want to get licensed and be "legal" and all that. I have a full time job so this is to supplement my income, and MAYBE some day be a full time job for me as my current full time job is way too stressful! Anyways, just wondering about possible tax write offs for having a home based business? Anyone do this and how do you do it and what proof do you need when you're submitting your taxes - what can you claim for your taxes if you have a home based business (i.e. utility costs, mortgage costs, etc) and does this every really benefit anyone (by increasing write offs even when you're reporting the extra income)?
I would like to know the same thing too. I'm in my first year of business.
Wish I could have an answer for you, but I am interested as well I am going to go apply for my license tomorrow!
You're allowed to deduct the costs associated with the actual square footage of the area that your business utilizes.
I would recommend finding a good accountant with small business experience to help you identify the specifics of what can and cannot be deducted, and can help you plan for how to document your business finances.
Or go to the IRS website if you do your own taxes:
I definitely agree with get with an accountant, if you have that many questions. And not criticizing the number of questions at all ...... just with the range of things you need to know, it's best to just let an expert handle it, especially when dealing with the IRS.
My understanding .... subject to correction by anyone with more expertise than me: Square footage must be exclusive. You can't deduct the corner in your bedroom as "office space". It must be a dedicated room used for NOTHING ELSE BUT the office.
For example, if you used your front living room exclusively for meeting clients, and that room was 25% of your home's total square footage, then you would be able to deduct 25% of your annual utility bills, your home maintenance (snow removal, landscaping, painting, roof repair), possibly your homeowners insurance, etc. Again, an accountant can tell you specifically and exactly what is or isn't allowed, but excellent record keeping is part of it.
Your mortgage expenses are usually already deductible on your personal taxes, so I'm not aware of any extra deductions there.