Tips And Guides

How To Save Money On Taxes
By Michael Baker

We are all looking for a way on how to save money on taxes. I know I am. And while I am a proponent of paying your taxes, you don’t necessarily need to pay as much as you are right now. I think what many of the tax payers fail to recognize is the tax laws are really setup with ways to help you. And the single, most popular method on how to save money on taxes is to start a home business.

I know, you have already been approached by all of these MLM, or direct selling, companies before. And yes, I would stay away from them as well. But, there are other ways to start a home based business, and not have to deal with someone calling you all the time. So, we know a home business will help save taxes, but how?

Good question. Here is how. Once you setup your business, either by incorporating or just using your social security number, you now have the legal right to take business deductions. And the single biggest deduction you can take is your home office. We all have an office these days, so why not deduct it. This is the way you deduct it.

Use the square footage of the office as a percentage of the overall square footage of the house. My house is 2850 sq ft, and the office is 450 sq ft. This is a percentage value of 15.7%. So, now we can take 15.7% of the mortgage, home owners insurance, electric and gas, water, and trash bills, and deduct all of them to the business. This one step will automatically give you a certain amount of money you can make as a profit, and not have to pay taxes on. You are already paying bills on this stuff, so why not get some money back?

If you have any other part of your house where you will do business, this can also be deducted. The one requirement is the room can not be a pass through room. It must have one entrance, and exit. If you have your computer in your living room, you can not deduct this. Closet spaces are good deductions as well. You would figure out this square footage just as above.

Then, everything in the office can be used a method on how to save money on taxes. Anything from office supplies, to computer equipment, to internet, to a second phone line, and even the cell phone, these can all be deducted.

What we have done, is taken all of your current expenses, set up a business, and used this business to pay for the expenses. Now, if you do not make any money in the business, then these deductions just count as a loss. My first year in business, I took a loss of $7,000 dollars on my taxes. This helped get me a nice return back. But running a home business is a proven method on how to save money on taxes.

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