Insurance

Owning your own home-based network marketing business has major tax benefits. (However, always consult your tax professional on such matters.) Tax laws, and the interpretation of them, change from year to year. Every person's tax situation and needs are different.

You can normally deduct the costs of the starter kit package and the product sampler kit, giveaways you offer as sample products, your telephone bill, auto expenses (actual expenses versus the standard IRS cents-per-mile rate), parking, tolls, travel, and lodging from the taxes of a network marketing business. Meals and entertainment are 50 percent deductible. Your business training, opportunity presentations when you invite new guests to join the network marketing company, and convention expenses are normally deductible. You can usually deduct for use of your home in your business, your home office furniture and business equipment, accounting and tax fees, postage, gifts, and promotions.

Let's talk about the business use of your home. You can deduct a percentage of the cost of your mortgage or rent. Your mortgage interest is always deductible under current tax law (and it is not likely Congress will mess with that deduction)! The deductible percentage of other home-business expenses is the amount of the total square footage of the home or apartment that is used "exclusively for business." (The IRS can get sticky about that "exclusively for business" qualification; ask your tax professional how to assure that your deduction is legal according to the IRS. You don't want to get burned should you be targeted for one of those nasty IRS audits!) You can deduct your real-estate taxes, water and sewer charges, insurance, utilities, heat, repairs, maintenance, landscaping, a visit by the exterminator, and so on. Ask your tax professional what you should list and make sure you didn't miss anything.

Let's say your mortgage payment (including interest) is $2,000 a month and you use 20 percent of your house exclusively for your business. Therefore, $400 a month can be deducted out of your $2,000 a month payment. Twenty percent of your real estate taxes, water and sewer charges, homeowner's insurance, utilities, heat, repairs, maintenance, landscaping, exterminator, and more can be deducted. You can deduct 100 percent of your real-estate taxes in any case. But when you file a business return, the "business use" portion of your home will show that percentage of your real-estate taxes as a business expense, which affects your business income, while the balance is an ordinary deduction. (Yes, it gets complicated; that's why you must use a tax professional!)

You must use an appointment book or diary as an expense log, and you must obtain receipts for every expenditure you deduct. You are not in business to have problems with the IRS, so the advice of a good tax professional is worth every penny you pay him or her!

You can deduct for business furniture and equipment, business accounting and tax preparation fees, postage, and all marketing expenses. You can't deduct calls to Aunt Harriet - unless she's working in your network. Christmas cards to members of your network (even if they are relatives) can be deducted as marketing and promotional expenses. This is another area where it pays to check with your tax professional to assure everything you claim is legal.

Let's say your telephone bill is $1,200 a year and your auto expenses are $6,000. Meals and entertainment are $2,600. Fifty percent of the cost of your meals and entertainment for business purposes is deductible, so that's $1,300. Your house or apartment expenses are $24,000. That adds up to $32,500. Assuming 20 percent of that is business expense, your deductible amount (20 percent of $32,500) is $6,500. Assuming you are in the 35 percent tax bracket, 35 percent times $6,500 yields a tax savings of $2,275. That's a very powerful tax write-off just for owning your own home-based business!

Now let's talk about your automobile. Your car payment (or lease payment) along with your auto insurance, repairs, maintenance, gas, etc., can be deducted to the extent that the mileage was for business purposes. Let's say you drive your automobile 30,000 miles a year. If 30 percent (9,000) of those miles are business miles from driving meeting to meeting, then 30 percent of your insurance, gas, repairs, maintenance, and car payments can be deducted using certain formulas. You can deduct whatever percentage of your actual expenses is equal to your percentage of business use. Your tax professional will look at whether your actual expenses or the standard per-mile rate will give you a larger deduction. Normally actual expenses will be a better deduction.