3 Things You Probably Didn’t Know About Your Taxes…

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There are myths that can keep you from receiving thousands of dollars in tax write offs

“A smart man only believes half of what he hears, a wise man knows which half.”~Jeff Cooper

Myths can definitely hinder you from taking advantage of great opportunities. Taking financial advice from Uncle Ray Ray who don’t know anything about finance and business can definitely take cash out of your pocket.

I’m not saying that I’m this financial guru who has the mystical golden scepter from the Wizard of Cash Flow Land, but I like to do my research in what I’m getting into.

In the previous blog post Do You Want To Be Wealthy? Learn This Rule…” I wrote down a partial list of what you can write off from your taxes as a home business owner. But some people are still skeptical about this. This is why “It’s How Much You Keep That Counts: Not How Much You Make” by Ronald R. Mueller is highly recommended.

A lot of home business owners look forward to tax season. Why? Because the government pays us to help keep the economy going in tax write offs.

Without businesses, there would be no jobs, no commerce, no economy, no nothing. So this is a great way to get compensated for what we do.

But there are those, rather they have a home business or don’t, still listen to Uncle Ray Ray’s advice on home businesses and taxes.

I was talking to a friend of mine who has a home business and had her taxes done by her uncle who is actually a CPA.

But there was one problem.

He doesn’t specialize in Home Business Tax Law and told her that she needed to make $500 in order for her to take advantage of all the tax write offs.

Now this may be true if you have an Limited Liability Corporation or a C Corporation, but this doesn’t apply to home businesses, which brings us to the first myth:

Myth #1: You have to show a profit in 2 out of 5 years in order to take advantage of the tax deductions.

This is actually the “Hobby Loss Rule.” Now you can have a hobby that can produce some type of income, but you have a HOME BASED BUSINESS, meaning you have an intent to produce a profit and you can prove it. By opening up a business account and keeping record, this can help prove that you are actively trying to make a profit in your business.

Myth #2: You can only write-off a room and the equipment and furniture as long as it’s exclusively used for your business.

This is the “Exclusive Use Rule” and it only applies to home businesses that provide SERVICES as oppose to those that supply PRODUCTS. Also “Incidental and Occasional Personal Use” of a room, furniture, or equipment (Computers, TV, etc..) can also still be use and yet still get tax write offs despite the Exclusive Use Rule.

Myth #3: The amount of write-offs can not be greater than the amount of money you made in your home business.

This is only true for Indirect Expenses such as Rent, Utilities, etc. which can not be more than the money you made in your home business. But as long as you have an intent to produce a profit you can use other categories such as Business Assets (desks, computers, filing cabinets, fax machines, etc.) and Direct Expenses (office supplies, cell phones, repairs and maintenance of rooms used for business) to compensate for write offs.

Once again, I highly recommend the book that was previously mentioned. This knowledge can definitely make a difference between losing out on the tax write offs and putting thousands of dollars back into your pocket.

TO YOUR SUCCESS!!!

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