An advantage of running a home based business is that there are income tax deductions you can claim. Here is a list of the top 5 home business tax deductions you don’t want to miss out on.
- Automobile Expenses
If you use your personal vehicle for your business, you can claim some of the expenses. Cost of fuel and oil, licensing, insurance, maintenance and repairs can all be claimed. You can also deduct interest on money you borrow to buy a vehicle as well as the cost of leasing a vehicle you use to earn your income. Note that you can only claim part of these expenses and there is a limit to the amount of interest on money that is deducted.
You can write off a portion of the cost of your home insurance if your home based business meets the conditions for claiming business-use-of-home expenses. Home based business is considered commercial and is completely separate from your home insurance. Also your home insurance policy may be invalidated if your insurer is not aware of your home business.
- Office Expenses
There are two types of expense; office expense such as pens, paper, clips, stamps, etc. that can be claimed, and depreciable assets such as computer hardware, printers, and filing cabinets. If you purchase equipment for your business, you can’t deduct the entire cost of it on your income tax for the year. You would use the Capital Cost Allowance to deduct a calculated portion of the expense as it depreciates over time.
- Mortgage Interest & Property Taxes
- If you have a mortgage on your home you can claim mortgage interest under business-use-of-home expenses, assuming your business meets the requirements.
- If you own your own home you are doing business out of, you can claim property taxes as an expense.
- If you are renting, you can deduct the cost of your rent.
Note that the portion of the expense deducted depends on how much of the space is used for your business.
- Other Business-Use-Of-Home Deductions
There are other expenses that home based business operators who qualify for business-use-of-home deductions can claim. Heat, light, water, maintenance, cleaning materials, telephone and internet connection are some of the most common claims. However, purchases and business expenses must be validated with an invoice or receipt of some sort to support the expense.
Be sure to do your research on the regulations and conditions for home based business tax deductions before doing your income tax. Speak to a business consultant or an accountant for extra help and advice.