Home-based businesses offer tax advantages that save money and open opportunities for deductions and increased wealth
Death and taxes aren’t as inevitable as once thought
Side businesses offer tremendous tax advantages. You may already be sold on the importance of having a side business in addition to your job, but if not, this is going to seal the deal for sure. Plain and simple, having a side business will save you money regardless of how well the business is doing, and here’s why.
There are two paths for earning income: W2, which means you have a job working for somebody else, or 1099, which means you’re working for yourself. When we receive W2s, we pay taxes on 100 percent of the income. With 1099s, we deduct business expenses first and then pay the taxes on the lower net amount. This can save potentially thousands of dollars a year.
What can be written off?
First, home office expenses. Take the percentage of the square feet in your house that is used for business, and you can write off that percentage of your mortgage payment, as well as that percentage of your utility bills, and even your cleaning.
Another one is travel expenses such as hotel stays for business, business meals and entertaining.
Here’s a really cool one — gas. When you pump the gas in your car, have you ever thought about how expensive gas is? It’s depressing. The U.S. tax code allows for more than 50 cents per mile to be written off against your taxes. As of this past year, it was 57 cents. But for now, let’s just call it 50 cents. Now think about it, you spend $2.50 for a gallon, and let’s say your car gets 20 miles to the gallon. Twenty miles to the gallon times just rounded down to 50 cents per mile, that’s $10 a gallon you get to write off. You spend $2.50 for the gallon, and you’re writing off as much as $10. Now that’s an exciting math equation!
The tax laws now, more than ever, favor small business owners with special deductions. The government incentivizes people to become entrepreneurs. Please seek tax advice from a professional when it comes time to do your taxes, but also please understand conceptually the many reasons to start a business today. Not only can you make money in your business, but you can also save money. It’s a win and another win.
Follow the math
By starting a side business, you can earn more money, pay less taxes, and build toward financial freedom. Every day that you delay you’re missing out on deductions, and you’re missing growing your income to make your life better. You don’t have to be successful to start, you just have to start to become successful. Find a good home-based business today.
Count me in!
Home-based business deductions may include deducting your home office, travel expenses and gasoline. Your fifth grade teacher was right — you are using math as an adult.