Tax deduction tips for home business

Did you know that you ask for the cost of cleaning and wear and tear on your furniture in your home can know business?

As the name implies, a house is a business, which is the company or household operates.

This means you do not have to do their work at home, to a home business. For example, a painter could do more work in other places, but if you rent or own house various facilities count as a home business.

In general, a home business all deductions other SMEs can I say; but we must also be aware of specific deductions.

There are basically two types of expenses you can claim your business area home: space and operating costs.

Parts of the house is for business

Occupancy costs include rent or mortgage interest, council rates, land taxes and insurance premiums at home.

Before removing the occupation costs, the test of deductibility of the Australian tax authority. This means you must have an area of your home exclusively for your business, such as an office or workshop. In the evaluation of this test, the ATO will take into account factors, including whether you have an identification of your business from home; if the industry is also for home use; and when used regularly for visits of clients.

If the test is successful, you can adjust the height of your mortgage or rent, borrow the amount of space you use for your business is.

For example, if the floor area of your home, office or on the shop floor is 15 percent of the total area of your home, may require 15 percent of the rent or mortgage interest and insurance Board.

There is a potential sting in the tail must be ahead of time to be considered a part of your mortgage deduction. You may have to pay taxes on capital gains from the sale of your home, if you pass the test of interest deduction. This is true if you run a small home business, even if you never ask; the question is how their home into a place of business.

Operating expenses: cost of doing business

You can get a deduction for the cost of running your home business, the above costs incurred that would live in the house.

The operating costs include electricity and gas for heating, cooling and lighting; Telephone and internet costs; Impairment of property and equipment, such as chairs, libraries and computer facilities; and the declining value of the furniture such as curtains, carpets and lighting. Cleaning costs are also deductible.

As required by the mortgage or rent, you may not be able to deduct these expenses for the part of your home that you actually use for your home business - and there are different ways of working, dass

You can calculate this value with the surface of your home office. For example, when the bottom surface is in your home office, to reach 10 percent of the total area of your home, can 10 percent of current costs.

This is the easiest method, but if you do not have a reserved space for household use, use to show how you calculated your deductions, you must use another method must be able. If you are checked, the ATO will want to see that the request is reasonable and includes the cost in normal life do.

It is a good idea to keep a diary for a period of four weeks, in order to show how the use of your office work at home increased spending, especially your phone bill.

Another alternative, a deduction of 34 cents per hour to work is to achieve at home. However, this method only covers the heating, cooling, lighting and furniture depreciation and to work as separately over the phone and Internet in other expenses.

Do not forget to bring

You can claim a deduction for the depreciation of certain assets of the company, such as computers and other office equipment, power tools and vehicles, as well as furniture, carpets and curtains.

As with other deductions, you can not argue, so companies do not use the proportion of enterprises and business registration of these assets in a newspaper 4 weeks.

About the Author

Chris Ridd is Managing Director of Small Business Accounting software company Xero .

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