A Home Based Business – It Makes Sense

A Home-Based Business Makes more than “Cents”, it can make Dollar$ too!

There are many reasons why so many people are favoring home-based over traditional business.

Home Business Advantages

There is no commute (you work out of your home), you are your own boss, there is much lower overhead compared to starting a traditional business, no employees (or few), many tax advantages instead of tax increases, and far fewer government restrictions. It is for these reasons, according to Entrepreneur magazine, that 95 percent of home-based businesses succeed in their first year and achieve an average income of $50,250 per year with many earning much more.

There are really two sets of tax laws in this country. One is for employees, and it allows deductions for individual retirement accounts, 401(k)s (if you have one set up by your company), interest and property taxes on your home (which some in Congress want to do away with ), and charity.

Then there are the laws for home-based business people who conduct their business either full-time or part-time. They can deduct, with proper documentation, their house, their spouse, and even children (by hiring them), their business vacations, their cars, and their food with colleagues. They can also set up a pension plan that makes any government plan seem paltry by comparison.

Take a look at the example family I mentioned from Part I – Why Start a Home Business.

For an example family – and for you – the meaning of all this is simple:

Say you earned an extra $15,000 in salary as an employee.  After all the taxes and other expenses, your take home could be less than $1,500.  But with a home business the entire $15,000 earned by a second income could be brought home.

This is an increase of almost 13 times the amount of take-home pay compared to an employee.

By having a home-based business many of your everyday expenses become deductible. This concept is known as “redirecting expenses.” With a legitimate home-based business, you can now deduct some of the expenses that you have in your everyday life with or without a business at home.

The tax benefits of a home based business can increase the money in your pocket even if you don’t make a penny from you home business.

If you don’t have a Home Based Business, START ONE!

In addition to all the benefits mentioned above, you can subsidize part of your home business with your tax savings. So while you are growing your home-based business you can use tax savings to grow it bigger. If your home-based business produces a tax loss in the first year or so, you can use that tax loss against any other income you have. It can be used against wages earned as an employee, dividends, pensions, or interest income-or you can use the loss against your spouse’s earnings if you file a joint return.

If the tax loss exceeds all your income for this year, no problem. You can carry back the loss two years and get a refund from the IRS for up to the last two years of income taxes paid, or you can carry over the loss twenty years. You read it right: You can offset up to 20 years of income!

For example, if you earn $50,000 in your current job with some company and you start a home-based business that generates a tax loss of 10,000, you only pay tax on $40,000.

You can never lose a properly documented business deduction as long as you run your legitimate business like a business with a bona fide business purpose and have an honest expectation of profit. Make also sure that all your expenses are ordinary and necessary and reasonable. If its required for you to do business it can be deductible.

A home based business is a great financial opportunity and the light at the end of the tunnel for many of us. The tax advantages alone can make a home-based business the single best financial move you could ever make.

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About Michael Tomberlin

I am happily married and have 6 wonderful kids so life is sweet! I am building my own business on the internet and helping others to do the same. If you are looking to achieve more in life and reach for your dreams of being your own boss let me know. I would love to help you.

Working online and sharing what I have learned about an online business and improving your health and wellness are two things I enjoy.

Comments

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