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Step 1
Incorporate the business. An S Corporation provides some tax savings to business owners that a sole proprietorship doesn’t.
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Step 2
Deduct the use of your car when running business errands. There is a specific amount per mile that is allowed as a tax deduction. Keep track of the number of miles you travel for your business and what was done on each trip.
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Step 3
Keep track of the office supplies and materials that you buy for your home based business. Keep the receipts and use them for a deduction at tax time. Items such as printer paper, computer software, books and even pens are deductible expenses. If the Internet connection is used exclusively for the business, hat is deductible as well.
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Step 4
Use the home office deduction. The home office deduction is only valid if there is a place in the home that s used only for the business. It can be a room or even part of a room, but the area deducted can have no other use. Any maintenance performed on that area is deductible as well. If there are repairs that are made to the entire home, such as a new roof, those repairs are deductible as a percentage of the total that affects the business area.
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Step 5
Log the phone calls you make for business and deduct the long distance amount. The log should include who was called and a basic overview of what was discussed.
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Step 6
Donate items to charity to reduce the amount of taxes you will owe. Keep receipts from the charities to prove your contributions. Either have the charity estimate the value of the items donated or estimate them yourself on the receipt.
