Home businesses

[aftriathlete]

Is there already a thread about home businesses? Been thinking about it a lot lately, after talking to people personally and reading financial advisor types all say that everyone should have a home business for the tax advantages alone. Wife and I have a couple ideas we think could work, would monetize something we are already doing anyway, and could make sense financially. No it’s not home videos.

 

[dylanvb]

Looking for advice myself, metal fabricator with my own machines and have gotten small side jobs but would like to get more insight to doing it more permanently.

 

[def90]

A home business is no different than any other business...

If you have an "advisor" or friend that is telling you to start some BS home business in order to write off your mortgage be ready for an audit. Stuff like writing off your mortgage or part of it requires that you have a completely separate area of your home that is only used for business, a desk in the corner or simply using your home address for your business does not count.

 

[cnelk]

It’s a piece of cake. Don’t be scared of doing it (no matter what you read on the internet)

I’ve had a handyman side business for a few years. There are some taxes benefits but more paperwork also.

Yes, you can have a ‘home office’, and deduct mileage, other partial household expenses, i.e. phone, internet, trash, etc.

Millions of people have a part time home business.

 

[insanelupus]

Some "savings" or "benefits" can be like stepping over dollars to pick up nickles.

 

[Team4LongGun]

a desk in the corner or simply using your home address for your business does not count.

I can only speak of many years ago, but a desk in the corner did count. You had to provide how many square feet of your home was utilized for the business. The accountant would figure out the percentage of home usage, and apply accordingly.

I recently was told many of the deductions I used to take (range gear, clothing, holsters, ammo, basically all training related gear) were no longer allowed to be itemized.
Again, not an accountant, but I don’t get as much back for work related equipment (not a home business) but rather Uncle Sam.

 

[cnelk]

Some "savings" or "benefits" can be like stepping over dollars to pick up nickles.

Definitely not a ‘Nickel’ thing

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[Mt Al]

Works very well for many people as long as the claims are legit and defendable. Just operate as if you're going to get audited then you don't have to worry about it. You can get your house square footage, find out the legit part of your home where the business operates and write off those expenses. Also miles and other legit expenses.

IMHO, don't do it for the tax write off, do it because it pays well and then enjoy the side benefit of the tax write off. Have worked with taxidermists, handymen/women, sewing production and repair, autobody, knife makers, book keepers, construction, electricians, artists, boat repair, etc., operating out of their house and many do extremely well. One point is: if you want to operate solo and not have employees and can operate out of your house and charge legit commercial rates, you save TONS on overhead of having a shop location to pay for. If you need/want employees operating out of a house is a pain.

My two cents.

 

[roadrunner]

It’s a piece of cake. Don’t be scared of doing it (no matter what you read on the internet)

I’ve had a handyman side business for a few years. There are some taxes benefits but more paperwork also.

Yes, you can have a ‘home office’, and deduct mileage, other partial household expenses, i.e. phone, internet, trash, etc.

Millions of people have a part time home business.

Depends on the business structure, among a few others things.

 

[String&stick]

If you have something you're doing that you can monetize then go for it.

I have one "business" owning some rentals and just started another side business outside of my day job. For my 2022 taxes I went from owing in about $2500 on top of what was taken all year for the wife and my W-2 wages, to receiving the biggest tax return we've ever received once we added in the business side of things.

Now most of that we depreciating a used pickup I bought, but I was getting a new truck anyway so taking the depreciation on 50% of the pickup that is work use was a no brainier!

It's also fairly easy with several businesses to show paper losses through depreciation on assets. As for the home office, I have a hunting room with my desk, computer, and printer in it. That is the room I do my book keeping in, keep files on rental properties in, etc. That room is 8% of the house and we write off accordingly. Alone it probably wouldn't make a big difference every year, but 3 out of 5 years or so it helps tip things in my favor to reduce my tax liability and on rare occasions get some cash back.

Its definitely been worth it over the years from a tax perspective, but hopefully your business is making money as well.

 

[mxgsfmdpx]

My wife and I have ran an at home business since 2014. Time flies when you’re having fun.

Talk to a GOOD tax lawyer. A local tax lawyer with decades of experience. Make an in person appointment and go over your plan and concerns. It will be an expensive 3 hours but book 3 hours, it will change your plans and set you on the right course from the get go.

 

[aftriathlete]

Thanks for the replies. It's an idea over dinner level of detail right now, but wife makes super fancy cupcakes from scratch that people are always saying "you should sell these." And she just enjoys baking and does it all the time anyway, so considering exploring the permits/inspections required for that. It's food though, so I expect there might be a lot of hoops to jump through, it can't be as simple as selling dreamcatchers or some other non-food widget you make at home. Second idea is personal training -- I have a garage gym, I'm a fitness nut, and am looking to add a sauna and cold plunge to the mix soon as well, so I was thinking about exploring getting all the paperwork in order to purchase those high-dollar items as business expenses and start offering some weekend personal training out of the garage that could include sauna and cold plunge use if the clients want that.

Half-baked ideas, but something I'm kicking around right now anyway. I would need to set up an LLC first, I'm hearing Delaware is where everyone is incorporating their LLCs these days for some reason.

 

[def90]

LLC you would just get in your own state if your state supports LLCs, no need to go to Delaware.

Delaware is where companies that work in banking financial lending go due to favorable state laws in regards to those activities. South Dakota is another big banking state for LLC/Incs.

I know a girl in Boise that was making sourdough out of her home kitchen during the lockdowns and she eventually moved in to a commissary. She said that dealing with the health dept for the at home licensing wasn't all that bad though she does have past restaurant experience.

 

[Silveroddo]

I have a buddy whose wife stays home with the kids and she does an at home baking business, they figured out all of the codes and legalities and are running it legit. Someone asked him during our fishing trip this year how it was going and they had just done their taxes and he confirmed it ended up being more of a break even deal that she enjoyed doing, and that it did not make any money.
My wife went through a couple of small business ideas, beauty products, and an in home yoga studio before she got into book keeping. She runs quick books for a half dozen businesses and it does pretty well.
I've messed around with a variety of things, I've never done it for the tax write offs, I did it to make money, being able to write off things that we already used anyway is a bonus, but I wouldn't do it to solely write off my phone bill. One thing to fully understand is that writing off an asset is just a deferment of taxes, if you ever plan to sell an asset that's been depreciated you need to understand your re-investment strategy or tax liabilities.
Had to google this to communicate it effectively, but keep this in mind
"Before you ever take a home office deduction, you need to think about the long-term possibilities.
When you sell your house, after having claimed the home office deduction, the deduction can affect your capital gains taxes. The capital gains tax exclusion allowed from the sale of your primary residence could be reduced by the amount that you have claimed for depreciation on your home office. Note
If you have always used the simplified home office deduction, which was instituted in 2013, this does not apply. "

Somebody brought up something like this a few months ago, theres a ton of podcasts and audio books out there, "The personal MBA", and "Rich Dad, Poor Dad" are some basic listens to get you thinking about making money, its all about numbers and their relationship with each other, if you can't see a clear path to the financial goal you have to keep crunching numbers till it makes sense or its apparent its not going to work. If the tax savings are still your goal, calculate what they will actually be v.s. the investment of time and money.