Ideal Way to Get Out of Debt: Start a Home Based Business

Many tax payers struggle year after year to rid themselves of debt. As an owner of a home based business, you will have plenty of deduction opportunities that will increase your tax refund. For starters you would be able to deduct your Home Office.

Let’s look at the following example: Camille is a fashion designer who uses an extra room in her apartment as her office. Camille’s apartment is 1,600 square feet and her office space is 160 square feet. Therefore, her office space represents 10% of the total square footage. Camille pays $500 per month for rent. She is able to write of 10% of her rent payment each month, which is $50. Her total rent write off for the year is $600. She would be able to deduct 10% of her renter’s insurance as well. Camille decides to complete some enhancements on her office space; she paints, she adds blinds to the windows for additional light in the room and has a new ceiling light fixture added. The cost of the paint/painting supplies is $125; the blinds cost $76 and the new ceiling fixture cost $110. The total write off for the office space enhancements is $311.

Camille uses her vehicle 35% of the time for her fashion design business. Her monthly car payment is $325. She is able to write of $113.75 per month for the use of her vehicle. Her yearly automobile write off is $1,365. She can also write off 35% of her yearly automobile maintenance costs, gas, etc.

Camille also pay for her utilities (electric and gas). Her average monthly utility bill is $130. Her yearly utility write off would be $624. She uses her cell phone 100% for her business. Her monthly cell phone bill is $65. Her yearly cell phone write off totals $780. She can also deduct some of her internet bill, but she would have to take into consideration that that some of that internet use is for non-work purposes as well. For example, she would be able to deduct 50% of her monthly internet bill as a business expense.

To keep accurate records of her customers, she purchases a computer, copier/printer and office supplies; she uses a post office box as her mailing address that cost $130 yearly. Her fashion related supplies (dress forms, pins, sewing machine, fabric, thread, etc) are all 100% write offs. In order to obtain new customers, she attends networking events; she purchases business cards, flyers and she has a website; she would be able to deduct 100% of those costs as well. And let’s not forget Camille’s other office supplies: paper, ink toner, postage, paperclips, etc. These are all 100% deductible too.

There are times when Camille takes potential customers out to lunch. Current tax laws stipulate that a business owner can only deduct 50% of the meal. Keep in mind that Uncle Sam is always on the alert for excessive and extravagant deductions. So, therefore please do not think about taking a client or customer to the Bahamas that will not go over big with Uncle Sam.

Camille’s deductions are easily anywhere from $5,000 – $6,000. Her tax refund would pay off a huge portion of her debt and a side effect of that would be an increased credit score. Now you know a few of the reasons the rich continue to get rich.

What type of home based businesses are easy to start: Avon, sewing, jewelry, cleaning service, nail technician, hair braiding, event planning, household organizer, flea market vendor, personal trainer, graphic design, used book sales, wedding planner, gift basket service, rug cleaning, moving service, music lessons and day care.

Barbara Peterson March 6, 2015.