How Taxes Increase Profit Margins for Home Based Businesses

A home based business has a number of advantages over traditional brick and mortar establishments. Did you know that taxes increase profit margins for home based businesses? One benefit in particular is in the ability to write off part of your home expenses as business expenses.

When you are running a business from home, you are leasing yourself the required space and utilities required to conduct your business. If you had to go out and lease office space, for example, it would represent a costly expense. Designating part of your home for work purposes just makes economic sense to protect your profit margins.

Fortunately, most government taxation bureaus agree wholeheartedly. You do not even need to have a formal contract to designate a business area. Nevertheless, you do need to be reasonable about how much of your home is designated for business purposes.

A home based business can therefore submit a portion of their utilities, mortgage, internet and other household expenses as a business expense. Not only does this reduce their payable taxes on the business, it makes running a business out of the home even more profitable.

In some cases, the business may only claim a portion of an expense. For example, if 10% of the square footage of the home is designated as office space for business purposes, then only 10% of the mortgage will be considered a business expense. Other items, however, may be claimed as a full, 100% business expense. A separate business telephone or fax line, for example, would be a full business expense, including long distance charges. Another example would be an internet-based business, which might designate 80% of the internet costs as a business expense, with only 20% being for personal and family use.

Tax laws vary by region and can change each year. Therefore, before investing any money in upgrades to the home or the business, entrepreneurs must do a little research and take advantage of the applicable tax laws. After all, a penny saved is a penny earned, so offsetting your income with legitimate business expenses will improve your bottom line and protect your profit margins. You can also choose an accounting software program that suits your individual needs.

Cam Creason

Author: Cam Creason

Cam Creason got his BA in English Literature and also studied Marketing at Arizona State University, but really didn't find his niche until he began writing reviews, blog articles, and business content online in 2009. In January 2015, Cam launched his own company specializing in blog articles, reviews, search engine optimization, and social media for a broad range of industries.

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