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The Simple Formula to Claiming Self-Employed Expenses

If you’re self-employed, you know how tricky it can be to file your taxes. People are always wondering if they can claim a portion of their self-employed mortgages, that cup of coffee they treated a client to, or a portion of their home phone bill when they file, and they get awfully confused about what they can, and what they cannot, claim. Here’s a simple formula that breaks it all down for you, and will have you adding deductions off the top of your head.

Quite simply, if you use it for your business you can claim it – or at least a portion of it – for your business. So many people get tripped up about things such as lunch meetings or coffee with clients, because they spend so much time rationalizing themselves out of money. If they’re meeting a client for lunch and pick up the tab, they might claim the actual lunch but then reason with themselves that the gas they put in the car beforehand will also be used for personal use.

That may be true, but how much of it will be used for personal? Probably not all of it, especially since you filled up just before you left. And yet, the business owner still dismisses the entire gas bill, not giving a second thought to claiming it on their taxes.

The same goes for expenses at home. That gas bill and electricity bill are all needed so that you can heat your home and turn the lights on every now and then. But would you be willing to work in the freezing cold if someone else were paying for it? Or in the dark? Probably not, and you shouldn’t settle for it when you’re the one paying the tab either. Pretty much anything you use at home – and yes, that includes the coffee grinds you buy to make yourself a cup of joe during the working hours – can be claimed on your taxes.

Unfortunately, there is no simple formula to determining just how much of those expenses you can claim. When it comes to your mortgage payment you can figure it out by determining how much square footage you use to work in your home, and then comparing that against your total square footage and your mortgage amount. For utility bills you can determine how much your bills are, how many hours a day you use that one utility, and how often you use it while you work. Groceries can be a bit simpler, even if you just add up what you eat during the work day at home.

Yes, everything and anything that you use for work at home can be claimed on your income tax as a deductible expense – and that’s the very simple formula to use if you’re ever in question about it. Simply ask yourself if you use the item for work - at all. And if you do, then you just need to start figuring out how much you can claim for that item.

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