 Rule #1 - Keep all records of everything!This should go without saying, but it's surprising how easy it is to lose track of receipts, bills, and other information that is business related. Don't throw out anything if it has to do with your business. Utilities, homeowners insurance, property taxes, office supplies and equipment, keep every single receipt.
Get your files organized!
Be organized right from the beginning, and take care of things the moment they come in. If it needs to be filed, file it. If it needs to be answered, answer it. If it needs to be trashed...you get the picture!
Prove your home business qualifies!
To be eligible for the home office tax, you must be able to show that the area of your home used for your office is "regularly and exclusively for your office", and not used for other things. So if your office is also the family room, you won't qualify. Make sure you have a room in your house that you can call "your office".
If you have a Child Day Care:
If you want to deduct the use of your home for a day care facility, you must be properly licensed by your state first. You cannot claim your day care under the Home Office Deduction if you are not licensed. So in that case, I'd say it is definitely worth taking the extra effort to get your license, as this exemption can really help you out at tax time!
Ordinary and Necessary Expenses:
Expenses can be deducted if they are "ordinary and necessary". Ordinary means that anyone else with a business like yours would have the same expenses, so your expenses are not unusual for your business. Necessary means that you had to spend this money in order to operate your business. You could not operate your business without spending this money on these things. Also, you must be able to back up your claims that you would not have had the expense if you hadn't started this business.
Some common deductible expenses might include:
Advertising - This includes business cards and letterheads, ads in newspapers, on television, radio, etc.
Accounting/Bookkeeping - If you had to pay someone to keep your books for you, or prepare your taxes, that would be deductible.
Bank Service Charges on your business checking account.
Car/Truck Expenses if your vehicle is used for your business.
Conferences that you may attend pertaining to your business.
Annual Credit Cards Fees for your business credit cards.
Depreciation on your business equipment or furniture.
Special classes or seminars you attend related to your business.
Equipment (including computers).
Home Office Furniture - you desk, chair, etc.
Home Office Expense (if you qualify)
Insurance
Interest on business credit cards or loans.
Legal and professional fees.
Licenses or fees for your business.
Maintenance and repairs on equipment
Office Supplies
Internet Fees if you can prove you must be online for your business (such as Web design)
Postage
Printing/Copying
Rent of space, furniture or equipment
Telephone (if only used for your business)
Travel expenses related to your business
Uniforms or special clothing (such as steel-toe workboots)
Utilities - Electricity
Wages paid to employees
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Tax & Finance Center
