Businesses operated from home could help business owners, whether they own or rent, lower their tax bills.
Home Office Deductions Can Lower Taxes Due
If you use part of your home for business, whether you are a homeowner or a renter, under IRS rules you might be able to deduct expenses from your income. While this is known as the home office deduction, the space does not have to be an office. A workshop used to manufacture items for sale, or a room dedicated to the storage of inventory for direct delivery to customers would also be eligible for the deduction.
In order to qualify for the deduction, you will need to regularly use part of your home exclusively for conducting business. For example, if you use a spare bedroom to operate your business, you can deduct expenses associated with that room. You will have to be able to demonstrate that you use your home as your principal place of business. It could be possible to qualify for the deduction even if you conduct business at a location outside of your home, if you use your home substantially and regularly to conduct business.
For example, if you have in-person meetings with clients in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business.
Other Expenses Can Also Be Deducted
In addition to the home office, you will be able to deduct the operating expenses of your business from your income. The Internal Revenue Service offers detailed guidance on which expenses will qualify for a home office deduction along with details on how to deduct travel-related costs and other business expenses. While professional tax advice could be valuable, the IRS information might be a useful starting point to learn how taxes will impact your small business, especially if it is a home-based business.