7 Tax-SavingTips for Home-Based
Businesses Maui Hawaii
Businesses Maui Hawaii
Filing taxes for your home-based business on Maui Hawaii doesn't have to
be a daunting process. Here's how to maximize your return.
be a daunting process. Here's how to maximize your return.
Filing taxes for your home-based business doesn't have to be a daunting
process. Here's how to maximize your return.
process. Here's how to maximize your return.
April 15 will be here before you know it. And while it might already be too
late to limit what you'll owe Uncle Sam for your 2010 taxes, it might be just
the perfect time to start thinking—and actively planning—for ways to save on
the taxes you'll pay on your home-based business in 2011.
late to limit what you'll owe Uncle Sam for your 2010 taxes, it might be just
the perfect time to start thinking—and actively planning—for ways to save on
the taxes you'll pay on your home-based business in 2011.
True tax planning gives you concepts and strategies needed to minimize
your, it's the key to your financial defense. As a business owner, you have
two ways to put cash in your pocket: Financial offense is making more;
financial defense is spending less. Taxes are probably your biggest single
expense. So it makes sense to focus your financial defense where you spend
the most.
One way to get your 2011 tax planning off to a good start
is to hire a tax consultant, someone who can both map out the latest IRS
changes and explain ways to help you prepare for them. In the meantime,
however, here are some tax-saving tips that you can get started on right
away.
your, it's the key to your financial defense. As a business owner, you have
two ways to put cash in your pocket: Financial offense is making more;
financial defense is spending less. Taxes are probably your biggest single
expense. So it makes sense to focus your financial defense where you spend
the most.
One way to get your 2011 tax planning off to a good start
is to hire a tax consultant, someone who can both map out the latest IRS
changes and explain ways to help you prepare for them. In the meantime,
however, here are some tax-saving tips that you can get started on right
away.
Tax Tip 1: Get Organized
Good tax planning begins with getting organized—particularly when it
comes to keeping good records about the things you spend money on for your
business. It's critical that entrepreneurs ensure that we take advantage of
every tax situation. That means treating receipts like cash, not trash, she
says.
comes to keeping good records about the things you spend money on for your
business. It's critical that entrepreneurs ensure that we take advantage of
every tax situation. That means treating receipts like cash, not trash, she
says.
Think about it: each
$100 business expense receipt could be worth up to
$50 when it comes time to filing your taxes, depending on your tax bracket.
To keep track of those expenses, Winston recommends carrying a receipt envelope with you in your purse, car, briefcase, backpack,or wherever works best for you.
$100 business expense receipt could be worth up to
$50 when it comes time to filing your taxes, depending on your tax bracket.
To keep track of those expenses, Winston recommends carrying a receipt envelope with you in your purse, car, briefcase, backpack,or wherever works best for you.
Then, as you make purchases for your
business—whether it relates to buying paper for a copier, picking up a
lunch tab for a customer, or buying plane fare to attend a trade show—you can
simply place the receipt into the envelope. As the envelope fills up, you
should then transfer the receipts to your accounting
file.
business—whether it relates to buying paper for a copier, picking up a
lunch tab for a customer, or buying plane fare to attend a trade show—you can
simply place the receipt into the envelope. As the envelope fills up, you
should then transfer the receipts to your accounting
file.
Tax Tip 2:
Calculate Your Start-up Expenses
Calculate Your Start-up Expenses
If 2011 is the year that you've finally decided to become your own boss,
then you might also have the opportunity to deduct the money you're spending
to get things off the ground.
Once you're running a business, expenses such as advertising,
utilities, office supplies, and repairs can be deducted as current business
expenses—but not before you open your doors for business. The costs of
getting a business started are capital expenses, you may
deduct $10,000 (up from $5,000) the first year you're in business; any
remainder must be deducted in equal amounts over the next 15 years.
utilities, office supplies, and repairs can be deducted as current business
expenses—but not before you open your doors for business. The costs of
getting a business started are capital expenses, you may
deduct $10,000 (up from $5,000) the first year you're in business; any
remainder must be deducted in equal amounts over the next 15 years.
The rub is that in order to take the deduction, your business actually
needs to be losing money. If you are profitable from the get-go, you may be
able to work around this rule by delaying paying some bills until after
you're in business, or by doing a small amount of business just to establish
an official start date.
needs to be losing money. If you are profitable from the get-go, you may be
able to work around this rule by delaying paying some bills until after
you're in business, or by doing a small amount of business just to establish
an official start date.
Tax Tip 3:
Maximize Your Home-Office Deductions
Maximize Your Home-Office Deductions
Home office expenses are probably the most misunderstood deduction in
the entire tax code. For years, taxpayers feared it raised an automatic audit
flag. But Congress has relaxed the rules, so now home offices attract far
less attention."
the entire tax code. For years, taxpayers feared it raised an automatic audit
flag. But Congress has relaxed the rules, so now home offices attract far
less attention."
For a home office to qualify for deductions, though, it must meet the
following criteria:
following criteria:
You must use the office exclusively and regularly for administrative
or management activities of your trade or business.
or management activities of your trade or business.
You have no other fixed location where you conduct
substantial administrative or management activities of your trade or
business.
substantial administrative or management activities of your trade or
business.
Claiming a home office lets you deduct the "business use percentage" of
expenses such as mortgage interest or rent, property taxes, utilities,
repairs, insurance, garbage pickup, and security. Plus, you'll get to
depreciate part of your purchase price.
expenses such as mortgage interest or rent, property taxes, utilities,
repairs, insurance, garbage pickup, and security. Plus, you'll get to
depreciate part of your purchase price.
Tax Tip 4: Deduct Your Health Insurance Costs
Self-employed entrepreneurs can now deduct the cost of their health
insurance both for themselves and for their families. The catch, however, is that the tax benefit
doesn't apply to those with a secondary business and a full-time job in which
their employer provides for a subsidized health plan. Those with spouses that
have an employer-subsidized health plan are also disqualified from the tax
deduction.
insurance both for themselves and for their families. The catch, however, is that the tax benefit
doesn't apply to those with a secondary business and a full-time job in which
their employer provides for a subsidized health plan. Those with spouses that
have an employer-subsidized health plan are also disqualified from the tax
deduction.
Tax Tip 5: Track Your Mileage
Car and truck expenses are easy to overlook. That's because you can take
a standard mileage allowance but that allowance is the same for all vehicles,
no matter how big they are, how much they cost, or how much gas they guzzle."
In other words, even if you take the standard deduction, you might be
short-changing yourself. That's why it's worth keeping track of your actual
expenses as a way to compare with the standard deduction.
Here's the
difference for 2011:
a standard mileage allowance but that allowance is the same for all vehicles,
no matter how big they are, how much they cost, or how much gas they guzzle."
In other words, even if you take the standard deduction, you might be
short-changing yourself. That's why it's worth keeping track of your actual
expenses as a way to compare with the standard deduction.
Here's the
difference for 2011:
- Actual expense method: You keep track of and deduct
all of your
actual business-related expenses. - Standard mileage rate method: You deduct a certain
amount (the
standard mileage rate) for each mile driven, plus all
business-related
tolls and parking fees. In 2011, the standard mileage
rate is $0.51 per
business mile driven, an increase from the $0.50 per-mile
rate in effect
for 2010.
The newer your car, the more you might benefit from using the actual
expense method, especially because you also deduct depreciation on it. But,
as with the deduction you can take for home-based expenses, you can only
deduct the portion of your vehicle(s) that you use for your business, which
means you need to also keep track of how much you use it for business as
compared to personal errands.
expense method, especially because you also deduct depreciation on it. But,
as with the deduction you can take for home-based expenses, you can only
deduct the portion of your vehicle(s) that you use for your business, which
means you need to also keep track of how much you use it for business as
compared to personal errands.
Tax Tip 6: Pay
Yourself
Yourself
Home-based entrepreneurs sometimes forget to pay themselves by setting
up an IRA or other retirement vehicle, which allows you to put pre-tax money
toward your retirement. Even if the monthly amounts start out small, you will
be surprised how soon you have built a nice account, with the advantage of a
tax deduction.
up an IRA or other retirement vehicle, which allows you to put pre-tax money
toward your retirement. Even if the monthly amounts start out small, you will
be surprised how soon you have built a nice account, with the advantage of a
tax deduction.
Tax Tip 7: Hire Your Family
Another tax-saving idea is to hire your child or a child who lives in
your neighborhood- for your business. Since any child can earn up to $5,700
tax free you can deduct their wages as a business expense. Write up a job
description, cut them a company check every pay period, make sure to fill out
a W-2, Plus your child learns about responsibility and earning a
paycheck.
your neighborhood- for your business. Since any child can earn up to $5,700
tax free you can deduct their wages as a business expense. Write up a job
description, cut them a company check every pay period, make sure to fill out
a W-2, Plus your child learns about responsibility and earning a
paycheck.
For more information and related services on Maui Hawaii
Please visit our Website or connect with us on your social network – www.NewStartMaui.com
Please visit our Website or connect with us on your social network – www.NewStartMaui.com
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