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Continued...
2. Your Own Home Based
Business Means Tax Deductions
Now consider the
situation where you decide to start your own home based
business.
Suddenly, many of your
everyday expenses are now being used for business
purposes and are now tax-deductible.
If you use one quarter of
your home exclusively for business use, you will be able
to deduct (or write-off) one quarter of all related
occupancy costs. These expenses may include maintenance
and repairs (that are not capital in nature), rent,
mortgage interest, house or apartment insurance, power,
heat, water, and property taxes.
As well, your vehicle
expenses used for business purposes are another tax
write-off. If you use your car ninety percent for
business purposes, you can deduct ninety percent of your
vehicle insurance, gas and oil, maintenance and repairs,
car washes, license and registration, auto club, loan
interest (within certain limits), and other costs from
your income. You may also write-off one hundred percent
of your business related parking. Capital Cost
Allownance (C.C.A.) on your vehicle is also allowed for
income tax purposes; depreciation is the accounting term
for this tax deduction.
The Canadian government
also allows as a deduction, fifty percent of your
business related entertainment expenses.
Also tax-deductible are
business related telephone expenses, Internet access,
office supplies, travel, books, memberships, and a host
of other expenditures.
3. Income Splitting
with Your Home Based Business
If you have a high paying
job, you will pay higher taxes because the rates of tax
increase as your income does.
With your own business,
you can pay reasonable wages to your spouse and
children. In this way, you can legally divert income
taxed at your higher rate to your family members that
are in a lower tax bracket.
This tax saving technique
is called income splitting. It is another good reason
why your own home based business is the ultimate tax
shelter.
4. Even a Part-Time
Home Based Business Works
Even if you have a
full-time job, running a part-time business can be
advantageous.
Of course, you must
actually run a real, moneymaking business. Any attempts
to write unprofitable hobbies off will ultimately fail
with the taxation authorities.
If you earned eight
thousand dollars during the year from your part-time
business and were able to deduct eight thousand dollars
in car expenses, home office expenses, entertainment
costs, office supplies, and other business related
expenditures, you would have a net business income of
nil. You would pay no tax on this additional income.
Don`t miss this important
point! Although these tax deductions are actual,
legitimate business expenses, these are expenditures you
would probably have made anyway, whether you had a
business or not.
Thus, by rearranging your
affairs to start and operate a home based business, you
have been able to convert non-deductible personal
expenditures into legally deductible business expenses.
You have successfully sheltered your income from tax and
have split your income with family members in lower tax
brackets.
Yes, indeed, your home
based business has become your ultimate tax shelter.
J. Stephen Pope,
President of Pope Consulting Inc., http://www.popeconsultinginc.com/
has been helping clients to earn maximum business
profits for over twenty-five years.
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Home
Based Business - Your Ultimate Tax Shelter
