The IRS bases your deductions on whether they are a direct expense or indirect expense. A direct expense is an expense that is exclusively business related. These expenses can receive a 100% tax deduction. These include advertising, equipment that is purchased for business use only and business supplies.

An indirect expense is based on the percentage of home used for your business. These include: insurance, utilities and repairs.

The IRS requires that if you are going to deduct your home office space it must be located in a place that is designated exclusively for your business. To figure the percentage of your home you can deduct, divide the square footage of your office by the total square footage of your home. If your home is 1000 square feet and your office space is 100 square feet, your deduction is 10%.

You may also deduct mileage that is business related. I recommend keeping a notebook in your vehicle to record your mileage. The mileage rate in 2003 is $0.36 per mile.

You are allowed to deduct 100% of purchase price of any equipment you buy during the year that is solely used for business purposes. If you purchase equipment that is also used for personal reasons, you are still allowed to deduct a percentage of the purchase price, adjusted accordingly to the amount you use it for business.

Phone calls and expenses that are business related may also be deducted as well. I recommend setting up a separate phone line for business use. This will make it easier to figure out the deduction. If you use your phone for personal calls, you can not deduct basic phone charges. In this case, you will be allowed to only deduct long distance charges that are business related and special services (such as call waiting).

It is important to know that you can only take a 100% deduction for business expenses if your business grosses more than your expenses (including depreciation). Any expenses that you can not deduct this year can be carried forward to the next year.

Some deductions you may be able to take are:

Home Office Space
Mileage
Repair and maintenance to home office
Office supplies
Postage
Percentage of business meals
Office equipment and furniture
Business travel and moving expenses
Advertising
Educational expenses and licenses
Legal fees
Accounting Fees
A percentage of the self-employment tax publications and books related to business
A percentage of your health insurance and medical and dental expenses
A percentage of real estate taxes
A Percentage of utilities

Please keep in mind that this is a guide, not an expert source. You should still consult accountants and attorneys, as needed.

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Anita DeFrank, owner of MommysHelperOnline.com is a busy work at home mom. MommysHelperOnline.com is the leading resource available online built to assist you with your home business. Whether you're brand new to the work at home game or you're an old pro, stop by today.

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