How to Minimize eBay Business Taxes

If you sell items for profit on eBay you are legally obligated to pay taxes on the money that you make. This holds true whether you consider your eBay sales a business or a hobby. Therefore, it is in your best interest to run your eBay sales like a business and minimize the taxes you pay by taking advantage of all allowable deductions.

Difficulty: Moderate

Instructions

1. Familiarize yourself with the business tax laws and allowable deductions so you do not miss out on any of them. Basically, anything that you purchase for use in your business is a business deduction. When your business is eBay this includes things such as computers, digital cameras, office supplies, shipping supplies, and anything else that you need to operate your business.

2. Keep good records. If the IRS decides to audit your business, you have to be able to prove all of the expenses you claimed. Pay for items with check or credit card whenever possible. File all receipts so you have them at the end of the year. Enter all expenses into your business software program as you make them so you are not scrambling at tax time to make sense of all the receipts.

3. Open a separate checking account to be used by your business for business expenses. Keeping business checking separate from personal checking, not only makes record keeping easier, but makes your business look more official in the eyes of the government.

4. Deduct any interest that you pay on your credit card, as long as the charges were made by the business. You can also deduct any interest on loans that are taken to cover business expenses.

5. Minimize the taxes that you have to pay by claiming business use of home. Determine how much of your home is used exclusively by your business. For a small eBay business this probably involves a home office and another room used for storing inventory and packaging purchases. Do the math to find out the percentage of your home that is used exclusively for your eBay business, and then you can deduct that percentage of your rent and utilities.

6. Hire your children, and other dependents, as employees of your eBay business. This allows you to pay them with before tax money, instead of after tax money. Be sure that they log the hours that they work, and that you pay them a fair market wage for the work they are performing. Even your 10 year old can be hired to do things such as wrapping packages for shipping.

Tips & Warnings

• You might want to hire a professional accountant to help you minimize your eBay business taxes. He can inform you of any tax benefits that you might have over looked, and the money that you pay him is also a business tax deduction.

Who Can Help Sponsored

• How To Make Big Money With Low-Budget Postcard Projects. PostcardProfits.com