Page 55 - March 2023

provides two ways. First is to keep track of your actual expenses and then subtract the percentage associated with your business. The second way tells you to note your exact yearly mileage and then apply the tax deductions on those miles. For the year 2020, the standard mileage rate is 57.5 cents per mile.
Let’s assume you travel in a Range Rover. For its lease, you pay $1500 every month, and in a year, you drive 10,000 miles in your Rover. Of these 10,000 miles, 80% come under driving to work. If you used the first method, in which you have to keep track of your actual expenses, you would spend a total of $18,000 in a year for your lease plus other expenses related to gas consumed and any additional maintenance costs.
You would get a tax deduction of about $14,400, which is only for your lease. On the other hand, if you used the standard mileage rate deduction method, you would only be able to get a deduction of $4,600.
Deduct Your Home Office
If you are a small business owner or you are
self-employed, and you work from home,
you might be eligible for the “home office
deduction.” There is a big myth regarding the
home office deduction. Many people believe that
the home office deduction usually results in an
audit. If you actually qualify for this deduction
and you have good records, you don’t have to worry about anything. According to IRS publication 587, your house just needs to meet two requirements to qualify as a deduction. First is that part of your house should be exclusively and regularly used for business, and the second is that you must prove that your home is used as your principal place of business.
Time Business Income and Expenses
Timing business is a procedure that is used to move your income from one year to the next. To make full use of this procedure, find out which year is going to have the highest taxes because the taxes you pay are going to depend on two things first is the income of your business, and the second is the rates on business taxes. To reduce your net income of a specific year, move your expenses to the year with higher taxes.
Review your present expenditures before the end of every year, and if you think reducing your income can give you some benefits, then pay some of the amounts in advance. By stocking up on supplies, you can also decrease and increase your revenue.
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