Oh what a relief it is! Tax Day is long behind us now.
If you have a home-based business, April 15 is not as horrible of a day as it is without one.
You may be saying, well it’s not so bad for me because I get a refund after filing. ~News flash…that’s not such a good thing!
First let’s talk about why having a home-based business is so fantastic!
We’ve had a home-based business for the past +6 years, obviously we are huge advocates. There are so many benefits to list that expand all over the radar so let’s fine tune the benefits to just the tax benefits:
- Home office space deductions
- Percentage of your home business expenses (utilities, rent/mortgage, insurance, etc)
- Business related expenses like office equipment, phone charges or services needed
- Business related commutes; mileage
- Business travel, meals, entertainment
- Employee gifts
- Plus so much more!
You can even hire your children as employees of your company which has huge tax benefits in itself!
I highly recommend you get with a tax professional to explore these benefits and others of starting a home based business. Specifically, a tax professional that specializes in home based businesses is even better!
Now moving on… How can getting a tax refund be such a bad thing, you ask? Getting a refund means you have paid too much in taxes over the course of the year. When those funds that were overpaid are not in your possession, there is that lost opportunity of earning interest.
Now it’s not the worst thing that could happen to you but it’s time we all become smarter in our finances and work our best to breakeven. That’s the name of the game! A professional can help you achieve this.
Now with being a home business owner comes great responsibility. Surprise! You are still responsible for paying taxes! You cannot avoid paying taxes. If you don’t pay, you can find yourself in a new home that will resemble a studio furnished with metal bars. Always work above the bar, don’t try to beat the system because the system will always win. Does anyone ever really beat the House at a Casino? I believe you already know the answer is No.
The best way I have found to stay organized and to plan for tax payments is to set aside monies at the end of each month into a savings account. This truly helps ease the blow when taxes become due. Trust me you will greatly appreciate this tip especially as your business succeeds and grows which increases your tax liability.
How would you figure out how much to set aside? Know your tax bracket and know your state tax rates. Again, this is another time a tax professional is beneficial! They can help you forecast a percentage to set aside for when it’s time to pay up.
Now if you are currently a W-2 employee and do not have a home business then here’s one way to look at your tax refund. Rather than plan your next “want” purchase, use it to kick start an emergency savings account, pay off a credit card or invest it! It may sound boring but we want you to be completely selfish and get a head start towards your goals.
REMEMBER: The more you pay in taxes means the more you’ve made! Embrace writing big checks & challenge yourself to write an even bigger check next year than you did this year!
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