So you have decided you need to develop extra income. Have you considered running your own home business? There are many advantages to running a business from home. First of all, you already have your home. Either you are renting or perhaps even buying your home. Or maybe you live with somebody else. But the main thing is, you don’t have to go and rent or buy another place to do business in. So the initial start up costs of having a business that you run from home is far less than finding an appropriate building or office and leasing or buying that building.
Another advantage is that you don’t have to GO someplace to begin work. Think about how many times you have gotten stuck in traffic. How much do you spend a week on gas just getting to and from places? Well, when your business is in your home, you don’t have to spend money or time driving around.
If you are running your own home business, there are tremendous tax advantages too. Part of the expense you are already spending to live can be written off as a business expense. There are of course certain conditions you must achieve, but any competent tax accountant will be able to steer you correctly in how much you can deduct.
Normally, the room that you have your business in or run it from must be isolated and separated from other rooms, and what you do there has to be mostly business. In other words, you can’t just dedicate a desk in one corner of your bedroom where you sleep, or you may not qualify to write off any household expenses.
However, if you have for example a two bedroom home of 1200 square feet that you are renting for $1100 a month, and you set up one of the bedrooms strictly for business only and do nothing besides business in that room, then you might be able to claim the cost of that room as a legitimate business expense. Suppose the bedroom was 12 feet by 10 feet. That means that bedroom is 120 square feet or 1/10th the total size of your house. So you might just be able to claim a deduction of $110 a month as office rental. In our illustration, your “office” is 10% of the size of the house, so you might be able to claim 10% of the electric bill for the house too as office expense. Over a year’s time, these deductions can really add up. But you have to keep accurate records, and itemize everything. Be sure to check with a good tax accountant or tax attorney before deducting anything as the IRS may have changed their requirements to qualify for legitimate business expenses. The really interesting thing is that even though you are already paying these expenses, once you have dedicated that bedroom exclusively to your business, then you can claim them as business deductions which means that you get to make and keep even more money before you have to pay taxes.
Now, if you are delivering a product, then of course IF you keep records of the miles you drive while doing business, then you can also deduct something like 35 cents for every mile you drive. And if you “have” to attend meetings where hundreds of excited people who are also doing the same home business meet to share their successes and teach each other how to be better in business, the cost of driving to and from these meetings or seminars as well as related costs of staying in a hotel (when necessary) and even eating out (if you are more than 50 miles from home) can also become business deductions.
So, if you live in New York and somebody in Hawaii buys one of your widgets, and you get a crazy idea that perhaps you should up and deliver that widget in person, perhaps you can write off your plane ticket, your meals, your hotel stay, etc. Of course, be sure to check with your accountant. The IRS might think that it would have been better to ship the widget because that would have been more cost effective. However, if you not only deliver the widget, but have a recruitment meeting where you can show more people how to get into your home business for themselves, providing you can document and actually verify that such a meeting took place, then the trip is a Business Trip and just might qualify to be deducted.
A lot of nurses who need continuing education credits to renew their licenses find that attending classes in exotic places is not only pleasurable but a tax write off as well. Again I strongly suggest that you check with a tax accountant or even a tax attorney before spending all your money delivering little bottles or boxes of widgets all over the world.
And by the way, your business should actually make some kind of real sales and turn profitable by the third year or the IRS might invoke the “expensive hobby” rule and disallow all your deductions.
All in all, a business from home is easier to start and run than starting one almost anywhere else.