TAX BREAKS FOR HOME BUSINESS
Did you know that you could be taking home an extra $5,000 each year – with little or no effort?
While it almost sounds too good to be true, it’s not! The US government
offers huge tax breaks to those who have home based businesses -
regardless of how well they do.
How is this possible? The tax laws that allow large corporations to
write off thousands of dollars in expenses are also available to those
with home-based businesses such as the “The Berry Tree” business
opportunity. The only difference between most network marketing
businesses and fortune 500 companies in the eyes of the IRS is their
size and the fact that network marketers can also deduct many home
office and living expenses.
Let’s take a look at some of the seemingly “ordinary” things that can
be legally deducted by a network marketing home-based business owner.
Meals and Entertainment
When you discuss business with co-workers and friends at lunch or
dinner, your meal is 50 percent tax deductible. For that matter, so are
other expenses relating to entertainment focused on building
relationships with prospects, retail customers, and downline or upline
distributors. Theater and sporting event tickets are 50 percent tax
deductible, too.
Car and Fuel
Automobile mileage is deductible between your home-based business
office and a meeting where business is discussed. That includes the
meals mentioned above, an opportunity meeting, or even golf outings
with friends who are prospects! Travel is deductible, whether it’s to
an industrial center or an island resort, if the purpose is to hold an
opportunity meeting, to discuss business with other travelers, or to
attend a seminar. Travel is deductible for a wife or husband whose
presence is helpful in closing the sale. You can also deduct wages paid
to your children for help in the business, and if those children have
no other sources of income, all wages under $4,000 per year are
tax-free. It’s a great way to save for college with Uncle Sam’s help!
Computer and Office Equipment
Home computers, fax machines, telephones, office supplies, and office
furniture are also fully tax deductible. But there’s more. The IRS’
only requirement is that you legitimately treat your network marketing
business as a business, not a hobby. That means regularly working it.
What counts as “regularly working” your business? Taking the actions
you are telling your downline to take: attending weekly meetings,
calling prospects regularly, using the product and telling people about
it, presenting the opportunity, and teaching others to do the same. If
the people you sponsor actively follow your guidance, they should make
money. But even if they don’t, the IRS will recognize their right to
home-based business tax breaks (just as it does yours) if they properly
document their activities and costs. The only catch is that expenses
directly related to your home office (rent, utilities, etc.) cannot be
used to generate a tax loss. They can only count against your business
profits for that year and carry over to negate profits in future years,
should your business take off.
Required Documentation
Documentation is a simple process. It merely means:
1) Saving receipts
2) Writing down in your day planner all business-related activities
3) Record business-related expenses and any revenues you earn.
Consistent record keeping will prove to the IRS that you are truly
running a business and not engaged in a hobby, whether or not it makes
money. What do these records look like? They’re simple. Just writing
down whom you spoke with about the business, where you went in pursuit
of your business, and what you spent in the ordinary course of
conducting business, will provide you with the proper documentation and
a sea of deductible expenses. For a maximum investment of five minutes
a day, the time spent record keeping is worth a minimum of $5,000 in
tax savings. That’s a little over $231 per hour of tax savings for the
time you spent keeping track of your activities and expenses.
TAX BREAK SPECIFICS
Which of your ordinary lifestyle expenses are deductible when you are a
network-marketing distributor? If you legitimately work your business
in any of the following ways, you can write it off. Check out the math:
$500:
Lunch with coworkers is deductible. (Hey, they’re prospects!) Four
dollars per day times 250 workdays: $1,000. Multiplied by the 50
percent deductible, that equals $500.
$1,500:
Travel expenses for you and your spouse to vacation land, if you hold
opportunity meetings (the meetings could be with the friends you are
visiting), and if both you and your spouse participate.
$1,800:
Home-office deduction ($150 per month) for use of the spare room in
your house, out of which you operate your home-based business. Make
sure to meet there sometimes with clients or prospects, to document the
meetings, and not to use the office for any other purpose.
$1,500:
Automobile mileage from your home office to your day job or other
places where you actively encounter prospects and actively discuss the
product. At 30 cents per mile, 20 miles round-trip times 250 days
equals $1,500.
$8,000:
Tax-free wages for two kids without other jobs who help in your
home-based business. That’s two children times $4,000 per year, paid to
accounts for college, weddings, etc.
$2,700:
Health insurance for your family. (This assumes your spouse is an
employee of your home-based business who chooses to include you and the
kids on the plan.) Premium of $225 per month multiplied by 12 months
equals $2,700.
Altogether, that’s $16,000 in tax deductible expenses. If your tax
bracket is 35 percent of your income, counting combined federal and
state taxes, your deductions would generate a $5,600 cash refund from
the IRS.
Remember:
* To deduct the above expenses, you must be actively working your
business (i.e. meals and trips mentioned above) and keeping records. Be
sure to consult your accountant or tax advisor to learn more about
applying these concepts to your business.