Tax Advice For Work At Home Moms

If you are a mom, working at home, your tax situation is probably a lot rosier than you think it is. You have many advantages working from home and you need to make sure you claim all the deductions for which you are qualified.

First of all, if you are working at home, did you know that you can deduct a portion of your rent or mortgage as a business expense? If you are working in a “home office”, take the square footage of your home office divided by the square footage of your entire home and that is the percentage of your rent or mortgage you can claim as a home office expense. For instance, if your home office is 100 square feet, and your home is 2000 square feet, you can deduct 5% of all costs associated with your home – home insurance, mortgage or rent, electricity, gas, etc. If you have a dedicated phone line or DSL/cable modem, you can deduct that cost, too!

When it comes tax time, make sure that you recognize your “at home” efforts as a recognizable business. In most cases, you don’t need a business license or even an incorporated company to operate a business. By claiming “sole proprietor”, you can reap the benefits of having a business without much of the usually associate expenses.

On your taxes, claim income from a sole proprietorship and make sure you fill in the “Home Office” expenses worksheet. It is on this worksheet that you will claim all of your home office expenses – cable, phone, electricity, gas, mortgage or rent, and insurance. In addition, you can claim many other expenses such as advertising and marketing costs, losses from clients who have not paid you, and in some cases, even clothing, medical expenses, and attorney’s fees.

Although you are working from home, no doubt you are in your car picking up supplies, meeting with clients, or taking items to the post office. The mileage for these trips is also deductible as a business expense – just keep track of your mileage and the client you were working for at the time of the trip. If you drive a lot, you may be better off claiming the costs of your – car loan, gas, insurance, upkeep – instead of mileage. Most online tax services allow you to compare the two alternative ways of claiming this deduction. The only warning is this – keep good records! Nothing will attract the auditors’ attention more than a taxpayer who hasn’t kept good records.