Top Niche Ideas

Before you can start your own home business, the one

thing that you should do is to designate a place for

you to work. The area that you work in should be free

of distractions and have a computer,a desk, a phone, a

connection to the Internet, and, if possible, a

bathroom. This way you will have everything you need

until you take your lunch break.

Something to remember is that you are ‘at work’ in

this area. An ideal solution is to have every

distraction taken care of. This means that you have

someone looking after your child, if possible. If your

child is younger than school age, hire someone to look

after them during the day.

This may seem strange since you are working at home,

but would you take a baby into your office with you?

Probably not – your boss wouldn’t allow it. Having

someone look after them while you are working ensures

that you will get everything done during business

hours.

If your children are school age and old enough to

understand, let them know that you are working, and

that you should only be disturbed if it’s an

emergency. If they are still young, have someone watch

them after school.

This may seem like an unnecessary expense, but if you

are talking to someone on the phone they won’t take

you seriously if they hear a crying baby in the

background, or children fighting. You want to make

yourself seem as professional as you can so that

people know they can trust you.

Taking a home office deduction has triggered many an audit for American taxpayers, so it’s important to understand the law and know if your home office qualifies for the home office deduction.

Best of all, you can prepare yourself before you even start your home business so you can get every penny possible back.

What is the home office deduction?

The more people work at home, the most often they try to claim a home office deduction on their income taxes. The home office deduction allows taxpayers who work at home and maintain a home office to get a significant reduction in income taxes, as long as certain standards are met.

What are the criteria for the deduction?

There are three primary criteria you must meet to take the home office deduction. For someone operating a work at home business, the first one is the hardest to meet.

The first criteria that the IRS uses to determine if you are eligible for the home office deduction is the question of how the space is used. To qualify, you must use your home office exclusively for your home business. If you use a corner of the family room for the home office, this can be hard to prove.

When the IRS talks about exclusive use, it means exclusive and regular use. That is, the only activities that should take place in the space should be those related to your business. You should only conduct work activities there. If the kids use the computer for gaming, or you pay bills at your desk, or print family menus there, it doesn’t qualify.

As well, the home office should be used regularly for your home business. Let’s say you primarily work on a laptop in your car but your home office is your home base. But if you rarely actually use that home office, you likely won’t be able to claim it on your taxes as a home office deduction.

If you run a daycare from your home, there is an exception given to the exclusive use criteria because while the home is used regularly for business, it’s not used exclusively for business.

The second criteria concerns why the home office is used as a home office. That is, if you work from home at your own business, you will meet this criterion. Most home businesses will meet this particular point, but if you work for an employer and you sometimes work at home, it can be hard to prove this particular requirement, especially if the employer also provides an office or space for you to work away from your home.

The third criterion applies to people who have more than one home business. If you have more than one home business, every single one of them must qualify for the home office deduction in order for you to take the deduction. That is, if one of the businesses does not qualify, but the others do, you can’t take the home office deduction on any of them.

What can you take?

When you qualify for the home office deduction, you can get tax deductions on the portion of your house that is used as a home office; for example, if you use 200 square feet for your home office, and your home is 1,600 square feet, you can get credits for 8 percent of the utilities, property taxes and other expenses related to your home.

In addition to the home office deduction, you can still take regular business deductions, like those for supplies, phone lines, internet service and the like.

How to make home office deductible

If you work at home full time, it makes sense to take some time figuring out how to create an environment that lends itself to taking that home office deduction. If your desk is in the family room, but you use it exclusively for the business, consider partitioning off the part of the room that is just for your business. That way, you create a home office that is used exclusively and regularly for your home office.

In addition, keep all receipts for computer purchases, furniture purchases and any other purchases that are used for your business. All of these are deductible in addition to the home office.

Organizing a home office can be difficult. Your work space might be shared with home space. The desk at which you work throughout the day could be the same desk at which you pay bills at in the evening.

That creates a particular problem for organizing your home business items. You might not give this much thought in the beginning, but there are many reasons why having an organized work space will benefit you. In addition, keeping your work items separate from your home items can help you at tax time.

Let’s look at some ideas for organizing your at-home office.

First, consider where your home office is – or will be – located. If you are able to take over a room in the house, you are in good shape. Organizing will be simpler than those who share another space in the house, like the family room or master bedroom.

Either way, consider the unique challenges that your space poses. Where you can you file your papers and other items that need to be organized? Do you have a space for your notebooks or manuals that you might need? If you sell items, do you have space to store your samples and display materials?

Next, purchase just enough organizing materials that will help you get the job done. We say “just enough” because many of us can go crazy buying organizational helpers. Things like files and boxes and white boards can send us into a purchasing frenzy. We go crazy. But if you buy too much, you can overwhelm yourself and create a situation that’s ultimately contrary to creating a solid and useful workspace.

Try to get yourself organized before you begin working. If you are setting up that home office, you will thank yourself over and over again for taking time to organize things before you actually began working. This creates a seamless transition into working at home.

All of this organizing can be made more difficult if you share your space with the rest of your family. If you work in the family room, for example, you will not only need to make sure your items are kept separate from the rest of the family’s items, but that they are somewhat decorative. You won’t have the luck to have an office to make a mess out of. You’ll want your space to be clean because you and your family as well as guests will see the space.

Finally, as you think about organizing your work space, consider exactly what you need the office space to do. If you sell cooking items, you’ll need an area to store your samples (or perhaps those could be stored elsewhere) as well as files for customer information and catalogs. If you run an in-bound calling business, you really only need a place for your headset and phone and perhaps a notebook and pens. You might also need files for your paperwork.

In the end, you want your home workspace to work well for you but without doing more than it needs to do. If you waste time making the space do more than you need it to, you are committing yourself to a larger investment of new business money, and you’re taking more of your home space than you need to. While working at home is ideal for many people, most home businesses will naturally encroach somewhat into the family space. Your goal is to keep your items organized and to create a good working environment but without forgetting that your home is first priority.