Home Based Business Tax Deductions You Don’t Want to Miss

If you run a home-based business, it is important to understand all the expenses that you can deduct in order to lower your income tax bill in the process. Home-based businesses have numerous tax advantages. The CRA allows such businesses to claim additional tax deductions on various expenses. We will take a look at some of the most common tax deductions for home-based businesses and how this can apply to you.

Vehicle Use Expenses

If you use your personal vehicle for business, you can claim the cost as a business expense when filing your tax return. This includes the money you use for fuel and oil, licensing and registration, insurance, car maintenance and repairs. If you borrowed money to buy the car, the interest on that loan can also be considered as a tax deduction. Other costs such as leasing costs and accident repairs may also count. Remember that if you use a car for business and personal use, you can only deduct a portion of the automobile expenses.

Insurance

The building, machinery or equipment that you use to earn a business income while working from home is likely insured. You can deduct all your insurance premiums for these items when filing your taxes. But make sure your insurer is aware that you are running a home business because failure to provide this information could invalidate your policy. To ensure your home-based business is adequately covered, get home based business insurance which you can use as a business deduction when filing taxes.

Office Costs

Think about the items that you use at home to conduct your business because you can claim them as part of your business expenses. They include things like your laptop, printers, pens and paper clips you use at home for your business. However, you need to understand which assets are depreciable which means that they will wear out with time so you can only claim a portion of the original cost as a tax deduction. The amount that you can claim as a tax deduction typically depends on the type of asset or property it is.

Mortgage Interest

If you have a mortgage for the home in which you conduct your home-based business, you can claim your mortgage interest as a deduction so long as it meets the business use of home deduction requirements. For instance, the workspace must be your principal place of business and you must use it on a regular and ongoing basis.

Other Expenses

Operating a home business can mean spending additional expenses on heat, lighting, water, maintenance/repairs, telephone, and internet connection which are used for business purposes. But you can only deduct a portion of these expenses since you also use them for personal use at home. Also, whatever you claim as a business expense shouldn’t be claimed elsewhere. Make sure all purchases and any form of business expenses which you wish to claim are substantiated by the right documents. In most cases, a sales invoice, purchase agreement, receipt or voucher will do.