Tax Savings from a Home Office

With more and more people expected to be self-employed and working from home, knowing the ins and outs of the home office deduction can make all the difference between a refund – or an audit.

Following are a number of helpful tips to help home-business-owners (and their advisors) be sure they’re getting everything back that they can.

Business-only
One of the most important things to be sure of before you try to claim the deduction is that some part of the home has to be exclusively and regularly used as the principal place of business. A mixed-use area, like a kitchen, won’t qualify.

The simplified option
Self-employed folks with an office in their home don’t need to do a lot of calculations and add up all their home-office-related expenses – the IRS now offers a simplified option based on the size of the office: You take a standard deduction of $5 per square foot of workspace, up to 300 square feet.

You can go with individual expenses or the simplified option, whichever is larger, and you can change from year to year.

Common deductions
Some of the business owner’s heating, electric and utility bills can be deducted, and phone, Internet and other information services may qualify, too. Note that separate Internet connections and phone numbers can help keep track of expenses.

An office isn’t an office without office supplies — which is why computers, printers, toner, paper, paper clips, staplers, staples, staple removers and other critical equipment may also qualify.

Furniture and upgrades to the home itself, if related to the office, may also be deductible.

Leaving home
Many of those with home offices will find themselves travelling for business purposes – even if it’s just driving across town to a client. Parking, tolls and mileage (at 54 cents a mile for business-related travel) may all be deductible, to say nothing of airfare and hotel rooms.

Record-keeping
The IRS recommends keeping expense records for at least three years after filing. Among the records home-business-owners should be holding onto are cancelled checks, bank statements, vendor invoices, bills, receipts and mileage logs.

More information on having a home office is available in IRS Publication 587.

originally written BY DANIEL HOOD for accountingtoday.com

Starting a Small Business

So you’re thinking about starting a business.  Where can you find the money to support your business while you grow it?  Well, some of your options include putting your own assets up as collateral for a business loan, hunting for an investor, or applying for a small business grant.  One of the biggest benefits of using grant money for your start up is that you don’t have to pay it back!  Where can you find these grants?

  1.  Catalog of Federal Domestic Assistance (CFDA)

The CFDA is a government database that lists all of the federal programs available to organizations and individuals. This database is a good place to start!

  1. Small Business Innovation Research (SBIR)

SBIR is a federal program, coordinated by the SBA that awards grants and contracts to small businesses engaged in research and development (R&D).  The grants fund the R&D necessary to develop innovative technological products that can be brought to market.

  1. Small Business-Specific Grant Opportunities
  • The Amber Foundation Grants (https://ambergrantsforwomen.com) began in 1998 to help women who are trying to start small businesses, home-based or online. The grants are small, usually $500 to $1000, and are intended to be used to upgrade equipment, pay for a website, etc.
  • Business Owners’ IdeaCafe Small Business Grant (http://www.businessownersideacafe.com) – The business with the most innovative business idea will receive a $1,000.00 grant, plus $500 in advertising credits.
  • Ewing Marion Kauffman Foundation (http://www.kauffman.org) – This foundation mainly provides grants to U.S. tax-exempt organizations.
  • Intuit’s Love Our Local Business(https://www.loveourlocalbusiness.com) – This group has given more than $1.1 million to winning small businesses. Businesses are nominated and voted for by customers, employees, and vendors.  The winners have received $25,000 in past competitions. 
  1. Your Local Government

Take some time to look at your local government websites for your city, county and state to see if they are offering any grants or other financial assistance programs for small businesses. The http://www.ecodevdirectory.com website is a good place to start.

  1. Grants.gov

Http://www.grants.gov is the US Government’s official website that includes a searchable database, online applications and a tracking system to see where you are in the application the process.  All 26 federal grant-making agencies can be accessed here for grant searching.

Although the grant award amounts are varied, most grant opportunities require a significant effort to win. There are grants available for small businesses…the trick is doing your research and digging deep enough to find them.  No matter what avenue you choose for starting your business, you will need assistance from a reputable CPA.  Give us a call at (636) 946-2800 when you are in the development stages.  We can provide you with excellent guidance!