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Tax Time: Home Office Deductions
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Taxes, what a headache! That is what most people think of when they think of filing taxes. Well, we are almost one month to the deadline for filing your taxes and if you haven't filed yet, this will be a valuable guide to what you can legitimately write off for your home business and if you have already filed, some good tips for next year.


We hope you enjoy this issue, and as always, email us if you have any questions. We will answer your email - We are here for you! Our email is

Tax Time: Home Office Deductions
by Vanessa Jones


Tax time is here. As a small business / Virtual Assistant, every deduction you can take will help you keep more of your money in your pocket.


There are a number of tax programs for small businesses to use at home instead of paying for an accountant to process them. The expense of the tax program and the cost of your time to process your taxes is far less than paying an accountant to do the same thing.


There are several programs you can use, most notably, TurboTax and Taxcut. The one I prefer is TurboTax. You would use the Home and Business version and either product can be bought at a retail store or online.


I have made a list of deductions you can take that will apply to your business: (Both tax products will walk you through these deductions and if they apply to you.)


Home Office Area: If you have one room that you use exclusively for your home office (meaning it is not used for a gym, living room, etc.), you can deduct the area (square ft.) from a portion of your taxes.


Automobile Expenses: These can be claimed by using two (2) different methods.
a. Actual Expense Method - deduct all business related expenses that you have receipts for. Keep track of gasoline and mileage driven - document where you went and what day and what time.

b. Standard Mileage Rate Method - deduct the standard mileage rate for each mile driven plus all business-related tolls and parking fees. For 2012, the standard mileage rate is 55.5 cents per business mile driven.


Start-up costs: You can deduct the expenses you paid to start your business. Once again, keep detailed receipts. You can deduct your expenses for advertising, utilities, office supplies, and repairs once your doors are open for business.

Books , Legal and Professional Fees:  Business books including those that help you do without legal and tax professionals are fully deductible as a cost of doing business.

Bad Debts: Only if you sold goods and did not get paid for them, you can deduct the cost of the goods. In regards to services, you cannot claim if you provided services to someone and they did not pay. This only pertains to actual items.


Entertaining: If you take clients or prospective clients out for lunch, you can claim 50% of the expense of that business meeting.  The meeting needs to pertain to your business. Keep detailed receipts such as how many people, the names of the people who were at the meeting, the topic of the meeting, and the length of the meeting i.e. 2:00pm to 4:00pm.

Travel: If you travel for business, you can deduct all expenses incurred for this travel. This includes plane fare, taxis, hotels, meals, lodging, cleaning clothes, telephone calls, faxes, and tips.


Interest: You can deduct interest if you used credit to finance business purchases.  The interest is fully tax-deductible.

New Equipment: You can write off the full cost of some assets in the year they were purchased instead of extending the deduction over a number of years. This is specified under Section 179 of the Internal Revenue Code, which can be found at

Moving Expenses: If you move because of your business or job, you may be able to deduct certain expenses in relation to the move.

Software: If software is purchased for business use only, it usually is depreciated over 36 months. Some software, not the software included in a new computer system, qualifies for a Section 179, which means 100% of the cost of the software can be deducted in the year it was purchased.

Charitable Contributions:  If your business is a partnership, LLC, or S-Corporation, the charitable contribution can be passed on to you to claim on your individual tax return. If your business is a C-Corporation, the Corporation will deduct the contribution. If you donate old furniture to a school, you can claim the value of the donation. If the value of the donation has been fully written off, you cannot claim for the donation.

Taxes: Yes, some taxes can be deducted. 
a. Sales Tax - this can be deducted as part of your cost of items sold. 
b. Excise and Fuel taxes are separately deductible expenses.
c. Employment Taxes -the employer's share is deductible as a business expense. 
d. Self-Employment Tax - this is paid by individuals, not their businesses, and cannot be deducted as a business expense.
e .Federal Income Tax paid on business income is NEVER deductible.
f. Real Estate Taxes - used on property for business is deductible along with special local assessments for repairs or maintenance. The amount of taxes cannot be taken all in one year. It is deducted over a number of years.
g. Cost of the tax program used to prepare your taxes are deductible.

Education Expenses - you can deduct this expense as long as it pertains to your business.

Advertising and Promotion - the cost for business cards, yellow page ads, etc., are deductible as current expenses.  Promotional costs i.e. sponsoring a high school soccer game - this is deductible only if there is a direct connection between the sponsorship and your business. An example of this would be a brochure for the soccer game that listed your company as a sponsor.

Business Association Fees - this is another title for membership fees or subscription fees.  If you pay a yearly membership or subscription fee for a service or magazine(s) that relates to your business, then these are deductible expenses.  It is one of the costs of doing business.  For example, the annual fee you pay to be a member of, is a deductible expense. 


There seems like a lot of areas for deductions for a small business. There are a number of other routine deductions that are very commonly left out. I have listed them below:


CDs and DVDs related to business skills
Bank service charges
Business gifts
Business-related magazines and books
Casual labor and tips
Casualty and theft losses
Coffee and beverage services
Consultant fees
Credit bureau fees
Office supplies
Online computer services - related to the business only
Parking and meters
Petty cash funds
Promotion and publicity
Seminars and trade shows
Taxi and bus fare
Telephone calls away from the business


Just one more note: even if you did not obtain a receipt for an expense, does not mean you cannot claim the expense.  Keep detailed information regarding that expense i.e. when it occurred, how much, where, who was there, etc.


Being self employed, does mean you have to pay self employment taxes, but with the right software and knowledge, you can take advantage of all the deductions offered for running a home business. This can help you to defray the cost and maybe even... put you in the black.


About the author:

Vanessa Jones is an experienced Virtual Assistant with 30+ years of administrative experience with a variety of managers and executives.  She can be contacted at if you have any questions regarding this article or if you need my experience as a Virtual Assistant.

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