Taxes and Home Based Business

April 6, 2013Rosie Bank & Mark Waldman

Three Money/Freedom Strategies Two Tax Systems Home Business Tax Deductions

Topics

This is not tax advice

We are not tax professionals

Information is based on our experience for 14 years as home business owners

Consult your own tax accountant / professional◦ Get a tax pro who is familiar with home business and has

some creativity

Disclaimer

Three Freedom Principles

Minimize Tax Liability

Overcome Personal Time Barrier

Create Continuous Cash Flow

Bonus: The Health To Enjoy It

Employee (W-2)

Business (1099, Including Home-Based)

Two Tax Systems

Deductions to Income◦ Mortgage Interest◦ Taxes

Real Estate Tax State Income Tax

◦ Contributions – IRA & Charity

Employee Deductible Expenses

Business Deductible Expenses – Expenses You Already Incur

Cell Phone Internet Computer/equipment** Office supplies (paper,

ink) Travel / Travel meals

(business travel) Professional wardrobe

upgrade Dry Cleaning Car/Truck expenses

(mileage)* Health Insurance

Home Office (indirect)*◦ Rent◦ Mortgage◦ Real Estate Taxes◦ Utilities

Gas & Electric Water Garbage Collection Alarm System Landline

◦ Homeowners Insurance◦ Housecleaning (if clients

are met)◦ Repairs/Maintenance

(some)

Percentage used for business**Expensed or Depreciated

*@Percentage of home area used exclusively for business

Business Deductible Expenses – Investing In Your Business

Promotional Materials Training

◦ Events (including travel) Convention Cruise Regional Conferences Personal Development

◦ Books, CDs, Magazines Business Meals &

Entertainment Advertising

Product Samples (including gifts!)

Postage Autoship Products

(required by company) Software Office expenses

(online services) Start Up Costs Pay Your Family / Kids

Minimize Tax Liability

Answer:HOME BASED

BUSINESS

“Every North American who works a full-time job and does not have a side business is probably overpaying taxes to the tune of $3000 to $9000 a year!”

-Sandy Botkin, former IRS tax attorney, CPA, founder of TRI

W-2 1099

$1,000 $1,000

$250 $900

$750 $100

$900 $25

-$150 $75

-

-

-

-

Traditional employment

Self employment

Taxable income after business deduction

Earnings Earnings

Taxes paid Business expense (computer)

After tax dollars

Personal expense (computer)

Taxes paid on taxable income

Remaining capital

Remaining capital

Business versus personal expense worksheet.It’s not only what you make. It’s what you keep that determines

your wealth.

Business Deductions - Existing ExpensesCell Phone ($100/mo @ 75%) $900.00Internet ($60/mo @ 80%) $576.00Offi ce Supplies ($20/mo) $240.00Business auto miles (2000mi @ $0.555/mile) $1,110.00Meals out - clients, prospects & partners ($100/mo@50%) $600.00Equipment (bluetooth, computer, cell phone…) $1,000.00Personal development (Books, club/toastmasters, online, CDs) $150.00

Subtotal $4,576.00Home Offi ce

Rent (Discuss Mortgage Interest & RE Taxes) $21,600.00Gas & Electric $1,800.00Renters Insurance $200.00

Total $23,600.0065 sq ft / 1500 sq ft 4.33%

Subtotal Home Offi ce Deduction $1,022.67Total Existing Business Deductions $5,598.67

Business Deductions - Business ExpensesPromotional Materials $150.00Training - convention, online $200.00Business Travel (air, hotel, 50%meals) - Convention $1,000.00Networking / Events $120.00Sampling $120.00Autoship $1,500.00

Total $3,090.00

Total Business Expenses $8,688.67Tax Savings @ 25% (Fed + State) $2,172.17

Business Expense Deductions Example

Home-Based Business?

It’s a NO-BRAINER!