1st Tax return. What is deductable?

Question

I am self-employed and am sending in my first ever tax return, so am not quite sure what I can deduct from my tax bill. I work mainly from home, but also in front of clients.
Can I use rent, electricity etc?
Can I deduct any of the expenses on clothes, make-up etc used for work?
My mobile phone is a billpay, so I am not charged for individual calls, just the overall monthly charge. Could I charge all of the bill, even though I do make some personal calls?

Answer 1

Since you don't say what your business is, it's impossible to give you an answer about what you can deduct.

Clothes and makeup, no. You might be able to deduct part of the mobile phone bill, but at most only the percentage used for business calls, definitely not all of the bill.

If you have an area of your home like a separate room that you use regularly and exclusively for your business, you can probably take a home office deduction. This would allow you to deduct a percentage of your rent and utilities - the percent would be whatever percent your office is of your total space. If your "office" is a dual-purpose room that you use for other purposes - a guest room, a TV room, your personal Internet surfing - then you can't take a home office deduction.

Depending on what your business is, there might well be lots of other items you could deduct. And by the way, you don't deduct them from your tax bill, you deduct the allowable expenses from your income, then calculate your tax bill.

You'd be wise to see a CPA for advice on what records you need to keep and what you can deduct, and maybe have the CPA prepare your return at least for the first year.

If you are going to owe more than $1000 in income tax and self-employment tax for the year, you should be making quarterly estimated payments or you'll owe penalties when you file, in addition to a possible large tax bill. Self-employment tax is for social security and medicare, and will end up being around 14% of your net inome after deductible expenses.

Update: I see on an earlier question of yours that you say Ireland. The above answer is for the US - this question didn't specify where you are. So if you're in Ireland, it doesn't apply.

Answer 2

If you had an office, you could deduct the rent and electricity for it.
If part of your home is used regularly and exclusively for the business, then you can deduct part, but not all, of the rent and electricity for the house. You calculate the percent based on number of rooms if they are the same size or number of square feet if the rooms are different sizes. If none of your home is used regularly and exclusively for business (all of it is used for other things as well), none of the rent can be deducted.
If it is your only phone, then you cannot deduct any of the cost. By law, none of the cost of having 1 phone in your home instead of 0 can be deducted. If you have more than one phone, then you can deduct the additional cost only. I am not sure if the phone has be used exclusively for business.
Clothes can be deducted if they are unsuitable for any other purpose. This would apply, for example, to protective gear, police uniforms, etc. Regular clothes that can be worn when not working cannot be deducted.
By make up, do you mean special theatrical make-up used when performing on stage or on camera or do you mean ordinary make up that you wear whenever you leave your house or have visitors? I think you can guess where I am going with this.

Answer 3

In the beginning of the year, the bank will send you a statement with the amount of interest you paid them during the last year. You take that to the tax preparer and they'll deduct that amount from your earned income. If you have an office in your house, you can deduct some expenses for that. Ask your tax preparer for a full list of what you can deduct.

Answer 4

You can write off a percentage of everything your home cost to operate as a home. If you use ten percent of the square footage in your business you can write off ten percent of the mortgage payment, taxes, insurance, utilities, and maintenance. You can write off some of your car cost as well. You cannot write off clothes unless it is a required uniform which in your case is not applicable. Your phone would be considered a utility, unless you have a separate phone just for business and in that case you could write it entirely off. When filing the IRS has printed guides to assist you and it is not real hard so you can probably do it yourself. Good Luck.

Answer 5

check with www.irs.gov and then your local state, county and city tax people. Do it by the books (legal) and if need be contact a tax attorney so all is legal so you don't get audited later on. Keep all your tax records (receipts, etc) even if you go out of business. Stay organized on this (Office Max can help with this)