The Power of Small Business

A small business will save you taxes with better write-offs, and help you build wealth with more cash flow. My clients save taxes and built their wealth with a small business. It can be a side hustle or owing a small rental property. I’m not proposing setting up any business just for tax write-offs, but to build a business that allows you to make more money and save taxes by writing things off, you wouldn’t otherwise be able to. 

Tax benefits of small business– TAX SAVINGS is a powerful benefit to start a small business. The small business will allow you to legitimately convert otherwise your personal expenses to valid business expenses. 

Home office deduction

If you have a small business may be a side- hustle, a rental property or any 1099,  you can qualify for the home office deduction. In fact, I will encourage you and WANT you to take the deduction. Before we talk about how to take deduction. We want to make sure you meet the two basic requirements. The part of your home office exclusively and regularly for conduction business and it must be your principal place of your business.  

There are two options to calculate the home office deduction.

Simplified Option

This option can reduce the recordkeeping burden by the allowable square footage of the office in stead actual expenses. A business owner is allowed to take a deduction of $5 per sq. ft for the part of their home used for business( A maximum 300 sq. ft) $1500 per year. This method still allows a business owner to take their mortgage and property tax as itemized deduction on sch A and there is NO requirement to recapture home office depreciation when you sell your personal home. 

Regular method

This is the better option if the business owner has an expensive residence, home office design, or more square footage. Thus, it’s important to take advantage of the bigger write-off and not settle for the simplified option. However, it also takes more math and record-keeping. The issues to consider include:

i-Deductions for a home office are based on the percentage of your home devoted to business use multiplied by expenses to maintain the home.

ii-Allowable expenses include mortgage interest, insurance, utilities, repairs, and depreciation.

iii-You will be stealing deductions from your Itemized Schedule A deductions in order to maximize the Home Office write-off, but that may not be a bad thing with the new limits on Mortgage Interest and Property Taxes. 

iv-You will have to recapture the depreciation you took for the Home Office when you sell your home in the future.

And…don’t forget the record-keeping to justify those expenses you are taking.

Auto Deduction

There’s another incredible reason for even a conservative home office deduction: it opens the door to a great auto deduction! Think about it. Mileage commuting to and from work, as well as for the personal use of your vehicle is not a write-off. However, if you have a “home office” (no matter how small) for your side-gig (aka. small business)…you can now justify writing off A LOT more auto mileage when leaving the home office to pursue your side-gig.

Writing off your cellphone and other Tech items

Over the years I’ve discovered there is a lot of misinformation out there regarding

What IS or IS NOT deductible…and this is certainly the case when it comes to the “technology” deduction.

However, some of the best tax deductions for small-business owners, AND legitimate ones, are purchases at Best Buy, Staples, Apple, Microsoft, and on Amazon.

Travel expenses

EVERY time an owner travels it should be a business write-off!!, travel expenses have always been 100% deductible! They include items such as, airfare, baggage fees, hotels, Airbnb, VRBO, rental cars & their gas, Uber, Lyft, and Turo, valet, taxi, trains, and tolls, etc.

Consider the five following ideas that you might be able to coordinate with business plan.

1-Annual company meeting (see the reference to Board Meetings below).

2-Visiting a current or possible client.

3-Meeting with a vendor. Picking up supplies or

4-equipment for your business.

5-Attending a conference or workshop.

6-Checking on your rental property.

Please schedule your free consultation with Sarita or write to us to if you have any questions.