I'm sure you've heard all the reasons for working for yourself.
You can set your own schedule. You can be your own boss. You won't have to commute. You can work in your underwear. (Does anyone ever do that?)
Yada yada.
All true, all wonderful (except maybe the underwear bit) and all good reasons for setting up your own business.
Bu there's one reason that no one ever talks about, and that's very strange because it's one of the most powerful.
Working for yourself, from home, can have a dramatic effect on your taxes.
That's not because you'll be earning less -- there's no reason for that to happen. It's because many of your everyday expenses now become tax deductible.
Not all of your expenses are tax deductible, but anything that relates to your business can, at least in part, be taken off your profits, reducing your tax liability.
So as an online publisher, that's obviously going to include the cost of a new computer, your Internet connection, the price of your domains and server charges.
But if you drive to the computer store to buy a new mouse or pick up new printer ink, then part of your car costs will be deductible too.
If you take a family vacation in Vegas or Florida and happen to spend a day or two at a marketing conference, your trip's expenses will be deductible.
If you ask one of your children to help out with your site, their allowance can become a wage -- and become tax deductible.
Even some of your electricity charges, mortgage payments and heating bills can be deductible.
Suddenly, every time you spend money, you're taking a little bit off your tax bill at the same time.
Clearly, it's not quite this simple. There are all sorts of conditions, limitations and other issues than will affect your tax deductions. Before you claim anything, it's always a good idea to speak to a tax professional. These things really aren't worth taking risks for.
But understand that becoming an online publisher and working from home can affect your income tax bill. If you do it right, it can make it a lot smaller.
Thank you, Joel. Good point.
All good and valid points Joel!
Very true, Joel.
Most people don't even consider that when they start out.
We finally got our corporations formed. Can't wait to get going.
And, if done right, car pmts/leases can also count towards lowering your liability as well.
BTW... anyone looking to buy a fictitious name/sole proprietorship in Pennsylvania? I owned this one since 1997- Credit Builders. Let me know.
Best,
-K
Thanks Joel...
I've been having my own busines for quite a few years now. When the business is getting a bit bigger you will have so many tax adventages, it has saved me many dollars and nice holydays too :-).
agree. at my country, not IRS but NPWP
Joel, very true. The mortgage part is very enticing. But you're right there are a lot of details associated with these deductions. One of those being having a separate entrance for the business. This is very beneficial.
Ken Hamilton
www.tididu.com
Thanks for the info Joel.
Something totally different. Someone is impersonating you on Twitter.
I got a message today in my mailbox:
"Joel Comm is now following you on Twitter!"
I was so happy and i was about to send you a thank you message.
But when i saw the url: http://twitter.com/Joel_Comm_ i knew it was fake.
Check it out, maybe it was the guy saying your the neighbour of the beast lol.
Expenses are helpful, but also remember that when you work for yourself (as in partnership, LLC, etc) you are the employer and the employee.
Therefore, you pick up both sides of the Social Security and Medicare taxes, which add up to over 15%. (also known as self-employment tax). Just something to consider before you take the plunge.
Joel, these are really good points. It seems like we get to save a few dollars on taxes, but in exchange for our savings there are business licenses, insurance requirements, book keepers and as you mentioned, tax professionals that all need to be paid for. Good tax advisers don't come cheep either.
In the area that I am in, it's mandatory for you to either be an LLC or incorporated, NO self proprietors allowed. I'd better stop now before I get too worked up about all of the "fees" that the government imposes upon us when we are self employed.
I like the caution in your second-last paragraph, otherwise a lot of us would be jumping in to the be-your-own-boss bandwagon, and also in response to what Jordy mentioned. Somehow I think the IRS is smart enough not to let such 'loopholes' in the system that there will be people who 'evade' their taxes in such a way.