First, determine if you qualify for a home business tax deduction. A home office is generally defined as a place where you meet with clients, patients, or customers. Or if this part of the house is used exclusively for business purposes. Most people have a general image that comes to mind when they hear the words “home office”. In reality, tax deductions can apply to a variety of places. Your home office can be a garage, basement, or a studio. If you do qualify as a home business, it is crucial to keep all records, receipts, and paperwork that you have accumulated throughout the year.

It will make tax time a much less stressful experience for the home business owner. Do not overlook the small things. This can be as simple as keeping the receipts when you purchase paper, staples, or toner. Any item that is purchased for your home business is usually considered a tax deduction. This may seem tedious and unimportant but nothing could be further from the truth. You might be amazed when all these little things add up at the end of the year.

Home business deductions can be separated into two categories. The first is for Direct Expenses. These are expenses that are needed for your actual home office. Direct expenses include office furniture, decorating costs, or equipment. Indirect Expenses are the expenses that must be paid the entire house. This includes heating, electricity, or mortgage interest payments. You can deduct the percentage of your business expenses from your utility costs. Another tax deduction to consider is telephone expenses. If you have one telephone line, the IRS is usually not going to believe that you use this only for your home business. The second phone line installed in your home is purely one hundred percent deductible. Another common deduction that is often missed is the lost distance charges incurred because of business calls.

Most home business owners use a vehicle as a means of transportation for their business. This vehicle can be used for running to the post office, or meeting with a client. Keep a log book in the vehicle to keep track of the mileage on these errands. Vehicles can be vital to run your home business, and overtime these kinds of charges can hurt your profits. There are many valuable tax deductions for vehicles, such as car repairs and car insurance. Airline fare can be another costly, but necessary aspect for home business owners. The IRS does allow your trip expense as another tax deduction.

The standard deduction provided by the IRS is adjusted each year for inflation. This is not a bad deduction to use if you cannot use any of the information that is provided in the following paragraphs. When you do apply for additional deductions you need to attach the information to Schedule A of Form 1040. This form should not be feared or you should not think that the IRS will be drawn to your tax return to provide additional scrutiny. The bottom line is that the tax laws allow for deductions and if you have the evidence that you incurred these expenses then you should claim these as deductions. It is surprisingly how quickly the deductions can add up over the 12 month period.

Medical expenses can be claimed as a tax deduction if you have spent over 7.5 % of your adjusted gross income. If you have a young family or if you have had a lot of illness these past 12 months, it is more than certain that you have spent more than 7.5% on medical expenses. When you consider that these expenses include doctor’s fees, hospital fees, drug prescriptions and a number of other expenses the bills will really add up over the 12 month period. The interest you pay on your home mortgage is another deduction if this is your first or second home and you use the home as your main residence. If your home has had damage done to it during the year, like a fire, losing the roof during high winds and other similar major damage you can claim anything above 10% of your gross income. This deduction applies as long as the area in which your home is in has not been declared a disaster area by the US Government.

Donations of money or property to a charitable organisation are another tax deduction. When you donate ensure that you get a receipt from the charitable organisation on the value of your donation. State and local taxes may be deductable for taxes that have been applied to you based on the underlying value of your asset. The asset is usually your property or your vehicle. There are also the standard deductibles you should be looking at such as union dues and tax return preparation expenses. The most important action you must do when claiming deductions is to keep all of your receipts. Your receipts are proof of expenditure, and even if the IRS wants to query any deduction you have the proof. This at the end of the day is all the IRS needs.