Keep More Money With These Tax Tips!
Author: ©Peg Bastin
This article deals with tax deductions for your home business. I'd like to show you how very simple it is to meet all the IRS requirements with a minimum of documentation.
Writing-Off Meals and Entertainment Just Got Easier!
The "Associated Entertainment Rule" states a business discussion held during dinner in a quiet restaurant, just before or just after attending the theater, makes both the dinner and the theater expenses 50% deductible.
The Tax Court defines "immediately" as "any time during the same 24-hour day." If you have a business meeting with a prospect in the morning, and you invite them to to be your guest for a round of golf several hours later, the golf expenses are tax-deductible at the 50% level, even though you didn't discuss business during golf.
Business discussion doesn't even have to be in person! You could have a business discussion on the telephone in the morning, and then take that business acquaintance to a movie that evening, and both movie tickets will be 50% deductible under this rule!
Be sure you record the information required to document each deduction, and be sure to comply with the requirement that you record that documentation within 24 hours of incurring the expense.
YES You CAN Tax-Deduct RENT!
The ONLY way the average taxpayer can legally write-off rent of a home, condo, apartment or houseboat is if you have a home-based business. So, if you don't have a business in your home, now is the time to start one.
If you have a home-based business in which you use 40% of your home in your business - then you can deduct 40% of your rent as a business expense. You can also deduct 40% of your gas, electric, water, sewer, and routine repairs and maintenance, etc!
In this category, for any particular year, you can only deduct an amount equal to the profit you earned on your home-based business. Most home-based business don't earn much profit, in the early years, because we put those profits back into marketing the business.
If you are not eligible to take these deductions this year, you can "roll-forward" the amount of these deductions for up to 20 years!
How to Make ALL Medical Costs Tax-Deductible.
When you have a home-based business, you can hire your spouse as an employee of your business and give them an Employee Benefit called "Self-Insured Medical Reimbursement Plan." All medical expenses not paid under other health insurance coverage will be reimbursed by your home-based business. This means any members of your immediate family, including the kids.
All non-reimbursed medical costs for everyone in your family, can be deducted as a Business Expense. Costs like annual deductibles, co-pays, not-covered procedures such as acupuncture, hearing aids and contacts or glasses.
Over-the-Counter Drugs ARE NOW Tax-Deductible, If you Have (or will set up) an FSA
Here are the details.
The U.S. Treasury Department and the IRS issued a "joint guidance," ruling that employees participating in an employer-sponsored health care "Flexible Spending Arrangement" (FSA), may claim reimbursement for over- the-counter drugs, which excludes those costs from your taxable income. (This applies to everyone currently in an FSA, OR who has a home-based business.)
Revenue Ruling 2003-102 states: "Reimbursements by an employer of amounts paid by an employee for medicines and drugs purchased by the employee without a physician's prescription are excludable from gross income under §105(b)."
What this means is that all non-prescription drugs, including common ones such as aspirin, laxatives and anti-itch cream, may be purchased with before-tax income.
If you are self-employed, even with a part-time home business, you can set up an FSA to cover employees of your business, even if that is just you. FSA's cover non-reimbursed health expenses of the employees AND his/her spouse AND all dependents.
That could save many people a lot of tax money!
If you spend substantial amounts on supplements you take for specific illnesses or health conditions consult with a home business tax professional for rulings in this area.
Setting up an FSA for your home-based business is not complicated or expensive, but should always be done by a tax professional who specializes in home-business tax law.
These tips should give anyone a reason to start their own home business. Keep records to avoid any trouble with the IRS. Don't mess with Uncle Sam, but don't cheat yourself either! I'll be back again with more tips and resources.
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