Deducting the Home Office - Joan started an...
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Joan started an e-Commerce business and grossed $60,000 this
year. With a portion of her income, Joan made the following
purchases. She spent $20,000 on current expenses, which
included: print advertising (such as business cards, letterheads,
invoices and yellow page advertising in phone directories);
computer equipment; furniture and office supplies (paper, printer
ink, staples, paper clips and such). Joan only has to pay taxes on
the remaining $40,000 her new business generated. The $20,000
in deductible expenses she spent on business related items are
needed to help her home based business survive and possibly
even flourish. Had she earned $60,000 from an employer, Joan
would have to pay taxes on a higher percentage of her earned
income, and quite possibly, the entire $60,000.
You cannot deduct expenses related to your hobbies. In other words, for the
activity’s expenses to be allowable deductibles, the activity must be profitable
within a few years of starting up.
Hobby activities have to be directly related to eventual sales, such as hot rod
cars or horses; but even then, the items you are trying to deduct must cost over
$500 each and must be perceived to be useful for more than one year into the
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