Best Kept Tax Savings Secret

best kept tax savings secretThis is me in Feb. 2013The best kept tax savings secret is having a home based business.  With this best kept tax savings secret, a portion of normal home expenses are now available as a tax deduction.  

Everyone has these expenses, and the opportunity to have them used to reduce personal taxes is the best kept tax savings secret.

 There is no other way to have these tax deductions, and I believe everyone can set up a home based business to help keep more of their hard earned money in their pockets.  There is a Taxpayers Bill of Rights and it acknowledges the desire to pay the least tax required.

Canadian Financial Expert Gail Vaz Oxlade advises everyone to get a home based business, however small, to take advantage of this best kept tax saving secret.

best kept tax savings secret

best kept tax savings secret

How to Keep More Of Your Hard Earned Money:

You’d be surprised how this advice can help you keep more of your hard earned income…for example:
My internet cost is over $600/year, and 100% of that cost is allowed in an online home based business because the use of the intent is essential to being able to do the business online.

In the Home Based Business I’m in, being able to use this best kept tax savings secret puts more money back in my pocket because of the tax deduction.  What really helps to make this a reasonable way to save money while also making money is that the monthly cost to being in the Home Based Business company is very reasonable.

Being in a Home Based Business is the only way to take advantage of being able to use expenses in the home
that you already pay, and be able to subtract them.  This is  a tax advantage and is a very simple way to help you pay the “least tax required” and is by definition the best kept tax savings secret.

best kept tax savings secret
Best Kept Tax Savings Secret

Tax Forms Show Allowed Deduction:

In the tax form I have provided below, there are 2 sections. The first are the deductions that do not apply to business use of home whereas the second section does.

In the first section (page 3),this is where you post expenses of:
~Advertising
~Meals and entertainment ( allowable..which is 50% in Canada)
~Bad debts
~business fees, dues, memberships and subscriptions (autoships)
~office expenses
~supplies
~legal accounting and other professional fees
~travel (including transportation fees, accommodations, and allowable part of the meals
~Telephone (long distance and portion of home phone and business cell phones)
~motor vehicle expenses
~capital cost allowance
~other expenses which include 100% of internet cost

The capital cost allowance may include higher cost items
such as computers.
Allowable deductions also include the initial cost to get started

When you go out and talk about your business..this is an allowable meal deduction
along with the use of motor vehicle. In Canada you can deduct 55 cents/km
for the first 5000 kms and 48 cents thereafter..this adds up!!!
I was told this by an accountant.

How To calculate Your Deductions:

To calculate your deductions, the above are subtracted from the gross income  in the home based business and if there is a profit after this, then the business use of home can be deducted which is on page 4 of the form.

If you do not have a profit, you can save the business use of home for future years and deduct it then.  It has to be for the same home based business therefore  it is best to find one you like and be in it for many years.

The business use of home is calculated by measuring the size of your home or rental property and then measuring the space you use for your business and depending on if it is a shared space for business and personal, and this is taken into account in the calculation, then the % the business is used is the % of the business use of home you can apply as a deduction.

The business use of home is an interesting list:

~heat
~electricity
~insurance ( house insurance)
~maintenance…if you have repairs like plumbing
or need your roof replaced..these are good examples of maintenance
and cleaning supplies
~mortgage interest
~property taxes
~other expenses..such as water, drainage
One of the more recent discoveries that you may find very useful is that some home renovations are part of the
home maintenance in the business use of home.  So, for example, if you need to re-roof your home, a percentage of this is a tax deduction with a home based business!

It might be helpful to see the actual Business tax form.

Here is the most recent Canadian Business Tax Form:
http://www.cra-arc.gc.ca/E/pbg/tf/t2125/t2125-14e.pdf

Here is the accompanying Guide:
http://www.cra-arc.gc.ca/E/pub/tg/t4002/t4002-14e.pdf

If you use a local Tax expert to do your taxes..
this is also a tax deduction.

Best Kept Tax Savings Secret Well Worth the Effort…

This very special way to save on taxes may sound like a lot of
effort and bother, but with the simple program I have to offer,
it is not difficult at all..and the advantages out weight the disadvantages.

The only difference is that you will need a way to keep track of your
expenses. I find it very interesting to see the yearly cost of my
utilities..and how they add up. Wouldn’t it be nice to offset that
with this best kept tax savings secret?

Being Canadian, I am more familiar with their tax system
but I think there are similarities in other countries too.
By getting a hold of the business tax forms from your country
the advantages for this best kept tax saving secret will become apparent.

The US Tax System:

 The IRS defines Multilevel Marketing Home Based Businesses

http://www.irs.gov/publications/p519/ch02.html#en_US_2013_publink10003101

Multi-level marketing. Certain companies sell products through a multi-level marketing arrangement, such that an upper-tier distributor, who has sponsored a lower-tier distributor, is entitled to a payment from the company based on certain activities of that lower-tier distributor. Generally, depending on the facts, payments from such multi-level marketing companies to independent (non-employee) distributors (upper-tier distributors) that are based on the sales or purchases of persons whom they have sponsored (lower-tier distributors) constitute income for the performance of personal services in recruiting, training, and supporting the lower-tier distributors. The source of such income is generally based on where the services of the upper-tier distributor are performed, and may, depending on the facts, be considered multi-year compensation, with the source of income determined over the period to which such compensation is attributable.

Some Tips:

Link to 20 overlooked US tax deductions ..includes some tips for Home based businesses: CLICK HERE

 

Information on the Home Business I am currently doing: CLICK HERE