How to Save on Your Taxes When You Work From Home
Many legal nurse consultants start their businesses working out of their homes. It makes sense and it is affordable. You may be wondering how to save on your taxes when you work from home.
If you work from home full-time, you may be eligible for a range of tax deductions not available to traditionally employed people. Check with your accountant about these points to see if they apply to you.
Here are four of the main ones that can help you save on your taxes.
A Home Office Deduction When You Work From Home
This is applicable if you are running a business out of your home. If your home office is used exclusively and regularly for business purposes, you may be able to deduct a portion of your home-related expenses, such as mortgage interest, property taxes, homeowners insurance and some utilities.
But there is a catch. Make sure that the space is used exclusively for business and does not double as the family game room when you are not working. Working out of a corner of your bedroom does not qualify for an office at home.
An Internal Revenue Service (IRS) assessor may come to examine the workspace and determine what percent you can deduct based on what he or she finds.
Self-Employment Taxes
If you earn more than $400 net income in a single year (and I hope you do – you should make that on a single case), you have to pay self-employment taxes in addition to income tax. The IRS uses a “pay-as-you-go system” for self-employment tax, so try to discipline yourself to send them estimated tax payments throughout the year. It is common to pay every quarter, so you don’t get hit with a huge tax bill at filing time.
Mileage and Travel Expenses
If you use your own car for business travel, or pay for meals and accommodation out of your own pocket (such as when you need to go see clients), these expenses might qualify for a tax deduction. Keep all receipts and categorize them, such as food, transport and so on. Note that you must have actual receipts, not just credit card statements.
For car mileage, keep a log in the car if you can, and also track things like oil changes and maintenance. At the end of the year, the IRS publishes the 2017 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. The rate is 53.5 cents per mile for 2017.
When I went to attorneys’ office to see them in connection with working on cases, I invoiced the attorney for the mileage at the current IRS rate and charged for travel time. If you get reimbursed for mileage, you cannot deduct that mileage also.
Self-Employment
When you are self-employed, you are eligible many deductions, and subject to the same record-keeping requirements as employed workers and telecommuters. keep meticulous records and receipts. Self-employment income and expenses are recorded on Schedule C of your tax return.
The tax laws change all the time. I suggest talking to your accountant to be sure you are taking advantage of the deductions a work from home person is entitled to, and to get guidance on simple ways to track your expenses.
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