A lot has been said about the many advantages of starting your own business. Let's start with the tax incentives. It's no secret to anyone that the tax laws are written to promote business ownership. So do what the rich do. Start your own business and take advantage of the favorable tax advantages that come with owning a business.
Build First, Pay Taxes Last
The difference between the employee and the business owner is that the employee pays taxes FIRST on what they earn and then gets to live on whatever is left over. The business owner spends their earnings to build their business FIRST and then pays taxes on what is left.
The business owner will always pay less tax than the employee simply because they can reduce the income amount they have to pay tax on. This enables the business owner to grow their business faster and for the business to generate investment dollars quicker.
Tax Advantages of a Home-Based Business
To take advantage of these deductions, the tax code states that these expenses need to be only "ordinary and necessary", and that your business needs to be one in which you are endeavoring to make a profit.
Here are some of the other business deductions you may be able to take advantage of:
- Home office expenses (repair, maintenance, property taxes)
- Business equipment (computers, cell phones)
- Office supplies
- Internet and telephone services
- Software and subscriptions
- Mileage and other auto expenses
- Travel, meals and entertainment
Proper Documentation a Must
Don't be afraid to take advantage of these deductions. As long as your expenses follow the tax code guidelines and you retain proper documentation to back-up the expenses, you will be protected in the rare case of an audit.