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I admit, I am quite terrible at getting taxes done (and even worse at getting them done on time!). But I have paid thousands of dollars over the years to really skilled tax professionals, and I have rememered at least one or two lessons learned along the way.

Qualifying for a Home Office Deduction

If you work primarily out of your home, there are indeed home office write-offs you can take. Beware, though, because when you go to sell your home in the future, there are complicated implications that may incur capital gains taxes. The money saved today may or may not outweigh the future costs. There are strict guidelines on what qualifies for a true home office deduction. In fact, if you are running a home day care, you can only write off expenses for the actual business hours the center is open. CCH has an overview and checklist that is both handy and informative.

Worthy of note :: the home office write off has been severely abused over the years, and the IRS considers it a ‘red flag’, and will take a closer look (read: higher probability of audit).

Mileage

Since we work out of the home, the IRS also gets to take advantage of our travel savings. People who drive to work every day can’t write off those miles. The IRS puts a similar kind of restriction on us. You can only write off the miles you drive on a string of at least three stops.

• You CAN’T write off the miles from home to Point A
• You CAN write off the miles from Point A to Point B
• You CAN’T write off miles from Point B to home
• BEWARE of adding a point C, D or E if they are NOT business related, because calculation gets tricky.

MealsThe laws around writing off meals are vague to say the least. Let’s say you meet a friend for coffee, and end up talking about blogging a whole lot, giving her advice on how to set it up, affiliate marketing, and how to get links. Can you write off the Starbucks bill?

It’s a judgement call, but maybe yes. The IRS states, a meal can be written off if it bears a “reasonable and proximate relationship to a trade or business“.

Ironically, if you take out a potential blog consulting client, and don’t speak a word about business, this too can be written off, because there is no requirement that business actually be discussed!

For me, honesty is always the best policy - and I don’t want to write off my Starbucks bill all of the time, only to have a cloud of guilt hanging over my head. It wouldn’t be worth the $50. Plus, you can only write off 50% of the meal, anyway, so it may be more trouble than it’s worth.

Blogging

Can you write off your blogging expenses, such as hosting, advertising, etc.? Well, it depends on whether your blog qualifies as a hobby or as a business. If you still have a day job, a blog may still qualify as a business.

Here are the IRS qualifications of blogging as a business vs. a hobby:

1. You carry on the activity in a business-like manner,
2. The time and effort you put into the activity indicate you intend to make it profitable,
3. You depend on income from the activity for your livelihood,
4. Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business),
5. You change your methods of operation in an attempt to improve profitability,
6. You, or your advisors, have the knowledge needed to carry on the activity as a successful business,
7. You were successful in making a profit in similar activities in the past,
8. The activity makes a profit in some years, and the amount of profit it makes, and
9. You can expect to make a future profit from the appreciation of the assets used in the activity.

Your Dog

In doing my research for this post, I found I had to eat a little crow. I snickered at the person who found my site using the keywords, “Can I write off my dog as a home office expense?”

Indeed you can, if your dog is also guarding inventory.

Seriously folks, I couldn’t make this stuff up.

Allow me to put a little disclaimer here letting you know that indeed I am not a tax professional, and before you do your taxes you should hire a pro, like I did.

Tags: Home Based Business, Work At Home Tips, Work At Home, Home Business, Business Ideas, WAHM, eMoms, Tax, Taxes, Write Offs, Deductions, Home Office