The Ultimate DIY: Self Employment

[Deeprig9]

I just started a business. I'm sure many of you have been through this before. At the moment, I'm a sole proprietor but will incorporate when necessary. I'm not a big fan of paying $700 to put "Inc." on the back of my name, and triple my paperwork, unless I have to.

 

I have some questions. I rent my home. It is a small house. I split the rent with my GF. The house has 4 rooms. One is my office. Can I deduct half my rent (1/4 total rent) from taxable income? What about the internet connection and utilities?

 

 

Also, to make the topic more interesting, share some of your self-employment successes and tragedies!

[Guitzilla]

My accountant advised me not to claim any home expenses (internet, heat, lights) as deductions because it is hard to prove that the space is used for business (small medical office, I do some billing from a small upstairs office.) If you aren't using it primarily for business, it might not be worth the hassle.

[GomezAddams1]

The IRS has a nice booklet you can download from their site that gives lots of good advice for small businesses. My wife ran a business out of our house for years and I found that booklet very helpful.

 

As to taking a home office deduction, I did it when she had her business. IIRC, there are several requirements for declaring a home office: you have to regularly have clients there, you cannot use it for any other activity, etc.

[masterbuilt]

You can deduct a portion of your living space if it is infact used solely for business purposes, such as a home office and computer room.

[Deeprig9]

 

The IRS has a nice booklet you can download from their site that gives lots of good advice for small businesses. My wife ran a business out of our house for years and I found that booklet very helpful. As to taking a home office deduction, I did it when she had her business. IIRC, there are several requirements for declaring a home office: you have to regularly have clients there, you cannot use it for any other activity, etc.

 

 

I downloaded something from IRS, Circular E or something, sort of a payroll tax guide. I don't have a payroll at the moment, sort of an independent contractor, pawning out business to other subs on stuff I can't do by myself for the moment, will build a payroll as business grows.

 

What kind of businesses do yall/have yall run?

[johnnyswitch]

if you have two vehicles and one is used solely for business, you can write off 100% of everything that goes into it - fuel, oil, repairs, everything. in canada anyway. not sure about the states. but this is how my dad and i do it for drywall.

 

not that that has anything to do with your home really.

[amp_surgeon]

The city where I live is pretty restrictive re. home businesses. They won't allow you to meet with clients or vendors at your home. You can't use your garage or any other structure on your property for your business (even if attached) - only your main house. You can't use more than 10% of the total space in your home for your business. And, you can't have ANY employees.

 

All those restrictions make it pretty hard to comply with the city statutes and still qualify for the home office deductions.

 

I only write off purchases of tangible property that I buy for my business. I write off equipment purchases that are exclusively for my business, like test equipment, work bench, tools, etc. I don't write off office equipment, like computers, printers, etc. because I also use those for personal use. I also don't write off things like internet service. I'm sure I could write off a lot more than I do, but the money I'd save in taxes isn't worth the extra bookeeping, or the risk of being audited.

[MahaloVision]

Here in WA state we have Small Business Development Centers that provide counseling on things like this. There's probably something similar where you live. Check the SBA site as well as your state, county and city websites.