Make sure you are getting all your home business tax deductions!

In any home business you definitely have often misunderstood tax advantages. The tax advantages become substantial when you take all of the deductions you are entitled to.  Like most home business owners, you may, and probably are, missing some very important deductions. You must itemize your deductions for your home business on a separate schedule just as you would for your personal deductions. Knowing which deductions you are entitled to could save your home business thousands of dollars a year.

Here is some information on how your income tax amount is figured by the IRS.
The U.S. tax code states that almost all income is subject to federal income tax. The way that you, as the owner of your home business, figure the final amount of income tax is as follows:

Gross Income - (All Expenses + Miscellaneous Deductions + Depreciation on Assets) = Taxable Income. 

Then: Taxable Income X (Your Tax Rate) = Income tax for the year.

Here is a quick definition of the terms in the above taxation equation:
Gross Income = The total of all income for the year after the cost of the inventory has been paid for.

Expenses = All costs of doing business during the fiscal tax year. Examples include payroll, materials, supplies and interest on business loans, etc. To find out if an expense qualifies as a legitimate business expense, consult your accountant or the IRS.

Depreciation = This is the way of spreading out the deductibility of an asset over a period of more than one year. The IRS has different depreciation schedules for different kinds of business property. This is done for assets like real estate, equipment and other assets with a long business use life. This method of write-off has certain advantages. Be sure to talk to your accountant regarding proper depreciation rules. 

Miscellaneous Deductions:
This is an often misunderstood and overlooked way to save a lot of money on taxes. Always track your expenses and be sure to save at least one copy of every deduction. You will be asked for proof of every transaction that is declared as a deduction if you are audited by the IRS.
Here is a list of some of the things you can deduct from your income taxes:

Business related expenses include:
1. Air fares
2. Auto expenses
3. Books and Magazines
4. Educational Expenses
5. Home Office Space* + a portion of utilities, telephone, and maintenance costs
6. Office Furniture
7. Cleaning Expenses
8. Meals with Business Clients
9. Laundry Expenses (When Traveling)
10. Advertising
11. Impairment-related Expenses
12. Licenses and Regulatory Fees

* If you own your home you must use the IRS depreciation rules to determine this deduction. If you rent you may also deduct a portion of your rent. Be sure to ask your accountant because this deduction alone can save you hundreds each tax year!
Check IRS Publication 535 to find out if you can deduct any or all of the above.

As you can see there are many deductions that are allowable for your home business. The best way to get more information on tax deductions and related information on income taxes is to go online to www.irs.gov. There you will find a search engine containing thousands of government publications that you can research and print out . Do your research, keep track of your expenses and take all of the deductions you can for maximum profit every year.