Tuesday, October 9, 2007

Tax Deduction Tactics for Making Money Online

Before working out the tax deduction for making money online, do check whether you're entitled for the home office related deductions. Compare your current position or situation against the tax qualifiers.

In most cases if you use a part of the home exclusively and continuously for your business or work, you should be eligible. In case of a business, one of the prerequisites might be that you should not have a fixed office location other than your home from where you carry on your major administrative or managerial work. Check up with the eligibility criteria or get it clarified fully for your convenience.

There are many expenses that you can account on the business front to get tax deductions.

First you have to prorate the space of your home office compared to your entire house. The area designated as home office need not even be a complete room by itself, but can even be a specific area demarcated for business or office use. Find the square foot space and divide it by the total area of your home to find the percentage. This can be used to get the appropriate values of interest paid for the space of your officemortgage, rent paid, house insurance , real estate related taxes and even some community expenses like payments for security or removal of trash etc.

If you own a home, you can calculate the investment you had made on the home which includes the price that you purchased, any costs and any expense that you made for improvement.

You can then find out the market value of your home and use that to depreciate the value of the office portion of the home, although such depreciation claims might have a tax implication while selling the home.

You can include some of your utility bills and prorate your gas and electricity expense. If your home office requires regular water supply you can even claim part of your water bills as business expense.

Ensure that you keep complete and correct records of all of your home expenses and Any expense that are related tobills. repairs or maintenance of the office can be accounted as business expense.

Some of the expenses might not be deductible in the current year and can even be carried over to the next tax year.

If you are self employed or an employee of a company, telephone expenses or other communication or office related equipment expense can also be claimed. For employees, they might have to compare their standard deduction against such itemized deduction to find out which is more advantageous.

It is always advisable to file tax even if you are making money online. Then only you can spend your earnings lavishly without any fear of tax officials. Have a Nice Shopping with your money earned online!!!

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