This Article is not about loopholes or gray areas in the law, but rather acceptable tax deductions for the self-employed Internet Home Office. And almost every decision an Internet business owner makes has tax consequences that can affect the bottom line of his/her year-end profit.

Therefore, considering this is not something you do in April, but something you should be doing all year round, this article will only focus on a few tips for your 11th hour tax savings. Qualified attorneys and CPAs are always advised in your final tax preparations.

So, congratulations on starting your home-based business. Hopefully your efforts have made some money during 2003, and you are looking for some tax deductions. And, let’s dispel the myth right now that doing so always leads to a Tax Audit – not so!

Did you know that women in the U.S. now start businesses at twice the rate of men? I just had to mention that… ;-) However, they are prone to numbers phobia! So they will be comforted by these facts:

As long as you don’t have any employees, filing for a separate tax id number with the IRS for your business is probably not necessary.

Cash-basis taxpayers use cash receipts (same as checks or credit cards) and disbursements as their method of keeping up with daily business. TIP: Keep a separate credit card for business purposes only.

Using your car for any part time "business" purpose allows specific deductions. The simple solution is to use the standard mileage rate; but you must keep a contemporaneous mileage log even if it’s a quick trip to Staples for supplies.

IRS Publications 583, 1066 and the IRS Small Business Resource Guide 2000 (and updates) will tell you all you need to know about giving Uncle Sam his due.

If you have not incorporated, or established a partnership or limited liability company, your fiscal year will begin January 1^st and end December 31^st.

Qualifying your home-office for proper deductions:

You must be using this portion of your home exclusively and on a regular basis. Exclusively means "only for business purposes" and Regular means "on a continuing basis"

You have no other fixed location where your business activities are conducted.

The square footage of your "office space" along with the percentage of heat and electricity.

The difference between hobby and business: Refer to the Federal Tax Code Section 280A, but in general terms a "business" is profit first, pleasure second. A hobby is the reverse.

Qualifying your business purchases for proper deductions: The rule of thumb here is this – is it something you would do or buy anyway? If your answer is "yes", you cannot deduct it – if your answer is "no", you can. So if the business deduction is usual, ordinary, necessary, etc. than Congress permits the deduction. I cannot deduct dog food, but our local Humane Society can.

But things like toner, paper, pens, pencils, erasers, file folders, calendars, and even special programs like Excel, Lotus, etc. are deductible items for the home-based business. The caution here is ---- take what is real.

David Meier, founder and COO of Business Development Coaching, provides small-business owners with ongoing knowledge and support required to become truly successful entrepreneurs. He lists the general deductions as:

• Your Home,
• Your Car
• Your Equipment
• Your Travel and Entertainment
• Your Retirement
• Your Family
• Your Self

In qualifying your home-office business deduction, you either qualify or you do not. There is no partial qualification available.

Of course this information is general in nature, and not meant as legal advice warranted or guaranteed. Because laws change over time and in different jurisdictions, it is imperative that you consult an attorney in your area regarding legal matters and an accountant regarding tax matters.

But I hope some of this information has given pause for next years tax savings.