As a business owner, you can expect to have more tax requirements than when you’re working as an employee. While filing taxes as a solo business owner is quite more complicated, it also opens up a lot of opportunities to reduce your tax bill.
Here are some of the best tips on proper taxation planning to help you go through the tax season headache-free:
1. Keep your records organized
One of the best ways to have a smooth tax season is to keep your records organized all year round. In this way, you will have an easier time submitting papers, and have less trouble looking for receipts, documents, and bills during the April rush.
Dedicate a file cabinet for keeping all of your records. Make sure to store away receipts, bills, invoices, and other physical documents that you need for tax season. Alternatively, you can download an app that will allow you to store digital copies of the documents. But make sure that you have the physical copies stored just in case.
2. Deduct your workspace
You will need a place in your home that is dedicated solely for business purposes in order to qualify the area as a business expense. For example, if you work on your kitchen table, that doesn’t qualify as a deductible. However, if you have a room or an area of the house that is dedicated exclusively for work, such as a home office or work area in the bedroom, you are allowed to list that space as a legitimate business expense.
Home-based business owners can list up to 300 square feet of workspace for $5 for every square foot. If you’ve made any modifications, such as painting or repairs, you may be able to deduct those expenses, too.
3. Include your health insurance and retirement plan
If you have health insurance coverage that is listed under your name (and not under a spouse’s), you can register the cost of the policy as a deductible. Moreover, if you contribute to a tax-deferred retirement plan, it should be able to help you trim your taxes as well.
4. List down office expenses
Listing down all office supplies that you use may seem tedious, but keep in mind that they are a 100% deductible. Keep records of all the office supplies that you buy for your business. From paperclips to a new work computer, keep the receipts for each purchase and include them in your business expenses.
5. Don’t forget the utilities
If you have a home office, you can also deduct a portion of your utility bills (electric, heating, Internet, etc.). The part to be deducted will depend on the square footage of your workspace.
At the same time, you can also deduct mileage if you use your vehicle for your business. However, you would need to do a good job of keeping track of the total business miles that you drive.
Make the tax season easier for you and your home business by following these simple tips. If you have more concerns about taxes or want to make sure you’re filing them correctly, speak with a professional tax counselor or CPA directly.