Tax Planning for Networkers - Part One Continued

By Jeffrey Babener, © 2013
Assuming you qualify, you can deduct a share of the expenses related to your entire home, such as mortgage
interest, insurance, utility bills, and home repair.  That share is based on the size of your office as a percentage of
the size of your home.  Let’s say you have a 3,000 square foot home, and your office is 300 square feet.  That
means you could deduct as a home office expense 10 percent of the mortgage interest and other applicable costs
relating to your whole house.  A depreciation deduction for the business portion of your home also comes into play
here.

However, the space must be used regularly and exclusively for business. Second, you must use it for administrative
or management activities of the business and you cannot have another fixed location for your business where you
conduct substantial administrative or management activities. This can a tough deduction and one that you should
be confident in, because it is one of the "red flags" that has a higher risk of triggering an audit than many other
deductions.

Ordinary Business Expenses

You can deduct ordinary business expenses such as accounting fees, advertising fees, license fees, and so on.  
The tax advantage here is that many of your expenses may cross over between your home lifestyle and your
business lifestyle, including telephone, cleaning supplies, office supplies, answering machines, audio and video
equipment, fax machines, office furniture and office decorations that improve both your home office and your
house.  

Record Keeping - The Name of the Game

If you talk to our friends at the IRS, they will tell you time and time again that the most important aspect of claiming
your expenses and deductions is keeping adequate records.  The IRS will suggest that you keep a separate bank
account, make a record of all business transactions, and retain all your records.  Record keeping and
substantiation are particularly important for deductions for travel expenses, entertainment expenses and gift
expenses.  And, the IRS will always tell you that a receipt is ordinarily the best evidence to prove the amount of
expense.

Is It All Worth It?

Should you take advantage of the expenses and deductions in the Internal Revenue Code?  The IRS will tell you
that those expenses and deductions are there for you as long as you don’t abuse them.  Look for Part Two of this
series which will focus on another sampler of important tax points, including travel expenses, business gifts, forms
and more forms and deductions for computers, automobiles and capital assets.  If you’re a serious network
marketer, the expenses and deductions can enrich your business and your personal lifestyle by putting hundreds
or thousands of dollars of after-tax savings in your bank account.   

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