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IV. Business Entrepreneur Thoughts
Start Your Own Company
One of the best tax deductions you can have is by having a home based company. Whether you operate a full time operation or have a second income from a part time operation, the tax deductions can mount up. It's too late for filing taxes for last year but you have plenty of time to start something this year that can benefit your tax situation for next year.
Understand, I'm not proposing that you do anything illegal or unethical and you should always seek the advice of an accountant if you aren't sure about an issue. What I do suggest is that there are many legitimate tax deductions available to us all when we operate a revenue generating business, whether it's our primary source of income or a secondary source.
You might take photos of soccer teams and sell them to parents, develop and sell software as a sideline business, or you may buy and sell items on EBAY for a profit. Any legitimate revenue producing business gives you the opportunity to deduct expenses related to generating those revenues.
Expense deductions include travel, entertainment, office equipment and supplies, advertising, consulting services, postage, even partial home expenses. Again, seek the advice of a qualified accountant on what your specific opportunity might be.
You don't have to incorporate the business and spend a lot of money on legal fees to set yourself up as a sole proprietor. All that is really required is to complete a Schedule C at tax time and to maintain proper records to substantiate your revenues and expenses. As your business grows, you can incorporate if it makes sense to do so.
You also do not have to make a profit to be considered a legitimate business and to be able to take valid tax deductions. You should make a profit at some point to insure an audit does not consider your operation a hobby.
Pull out a Schedule C tax form from the IRS sometime and do a quick calculation of the revenue and expenses that you might legitimately have in a year. You might be surprised at the amount of tax deductions available to you. If you are in a 25% tax bracket, every $100.00 of deductions saves you $25.00 in tax. The tax savings can mount up.
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