A home business is more than just a new source of income. If you play your cards right, you could also use it to lower your personal taxes.
That's all thanks to small business tax deductions. From gas to craft supplies, you might be surprised at some of the home business expenses you can write off on your taxes.
7 Home Business Ideas with Awesome Small Business Tax Deductions
Ready to start earning extra income while enjoying the benefits of small business tax deductions? These seven ideas can help.
1. Retail Arbitrage
Retain arbitrage involves purchasing items for low prices at stores such as Walmart, Dollar General, Dollar Tree and online wholesalers like Alibaba. You can purchase them in bulk to sell online at a higher price point.
All you need to run this business is an area of your home where you can set up shop and also store all of your inventory. You'll also need an internet connection to make sales on platforms like Amazon, eBay and Facebook Marketplace.
With a retail arbitrage business, you can take the opportunity to write off a variety of expenses when tax season comes around. Those can include:
- The portion of your rent or mortgage that pays for your inventory space.
- A portion of your internet bill.
- The cost of shipping your retail items and shipping supplies.
- Part of the cost of your computer or whatever device you use to sell retail items online.
- The amount you pay to purchase retail items for resale.
- The cost of gas you use driving to and from brick-and-mortar retail locations for business purposes.
A word to the wise: If you're wondering which home-based business is most profitable, the answer could be one that focuses on retail arbitrage, provided you can find in-demand items to sell.
2. Flipping Secondhand Items
Don't want to go out and buy a slew of new items to sell through retail arbitrage? Try flipping secondhand items instead. Whether you source them from your own closet, local thrift stores or online marketplaces, some of the best items to flip include:
- Clothing
- Film or digital cameras
- Smartphones, tablets and other types of tech
- Household appliances
- Vintage jewelry
- Designer bags
- Sneakers
- Furniture
- Video games, DVDs and Blu-Ray discs
- Tools and yard equipment
You also have plenty of flexibility when it comes to choosing which platform to sell your secondhand items on. Widely-used options include Depop, Etsy, OfferUp, eBay and Facebook Marketplace.
Come tax season, you'll be able to deduct expenses such as:
- The portion of your rent or mortgage that covers your inventory space.
- A portion of your internet bill.
- The cost of shipping secondhand items and shipping supplies.
- Part of the cost of your computer or whatever device you use to sell flipped secondhand items.
- The amount you pay to purchase secondhand items from thrift stores, consignment shops and the like.
- The cost of gas you use driving to and from secondhand shops or private sellers for business purposes.
3. Consulting
If you're an expert in a particular field or experienced with a certain subject, you might want to start a home-based consulting business.
Let's say you're an accomplished marketer, for instance. Plenty of businesses are looking to outsource marketing rather than build their own team. Look for different businesses online you could help and reach out to them.
The same applies if you're experienced in human resources (HR), public relations (PR), information technology (IT), regulatory compliance or any other field companies find useful.
As a consultant, you'll be able to deduct expenses like these from your taxes:
- The portion of your rent or mortgage that covers your home consulting office.
- A portion of your internet bill, as well as part of your phone bill if you use it to communicate with clients.
- Part of the cost of your computer.
- The cost of any software programs you purchase for professional use, such as Microsoft Excel to create spreadsheets.
4. Training, Teaching and Coaching
Companies aren't the only ones looking for experts to help them achieve their goals — a great deal of individual people are, too.
That's why, with the right set of skills or specialized experience, you might be able to start a home-based business as a:
- Personal trainer
- Life coach
- Academic tutor
- Health and wellness coach
- Nutrition or culinary instructor
- Online teacher
- Music teacher
- Any other type of in-demand trainer, teacher or coach
When you start tallying up your tax deductions as a trainer, teacher or coach, remember to account for:
- The portion of your rent or mortgage that covers your home office.
- A portion of your internet bill, as well as part of your phone bill if you use it to communicate with clients.
- Part of the cost of your computer, as well as your smartphone if you use it to talk with clients.
- The cost of gas you use traveling to and from clients' homes.
- The cost of any supplies you use in your training sessions, such as fitness equipment, musical instruments, academic worksheets and so on.
5. Creating Handmade Items
Got a creative streak? It might just be the key to your next income stream. From woodworking, painting and pottery to leatherworking, embroidery and jewelry making, there are myriad ways you can make (and sell!) handmade items.
Once your items are finished, you can try selling them at places like craft fairs, cafes and gift shops. Or, you can sell your creations on online handmade platforms like Etsy and Amazon Handmade.
Fortunately, many of the costs associated with selling handmade items can be written off on your taxes. These can include:
- The portion of your rent or mortgage that covers your supplies storage area, as well as the space where you make each item.
- A portion of your internet bill.
- The cost of shipping your handmade items and shipping supplies.
- Part of the cost of your computer or whatever device you use to sell your handmade items.
- The cost of your crafting and art supplies, whether that means a pottery wheel and clay or wood saws and carving tools.
6. Freelance Writing, Editing or Designing
If you have a knack for (or prior experience with) writing, editing or creating graphic designs, you could earn some side income — or even start a new career — by opening a home freelancing business.
Being a freelancer gives you a great deal of flexibility in your work. You can work closely with just one or two clients, for example, or you can do a wide array of projects for a number of clients using platforms like Fiverr and Upwork.
As with other computer-based, home-based businesses, your freelance business will allow you to take advantage of small business tax deductions such as:
- The portion of your rent or mortgage that pays for your home freelancing office.
- A portion of your internet bill, as well as part of your phone bill if you use it to coordinate with clients.
- Part of the cost of your computer, as well as a graphics tablet if you use it for design work.
- The cost of any software programs you use for your freelancing work, such as Microsoft Word for writing documents or Adobe Illustrator for creating designs.
7. Becoming a Social Media Pro
For people who love using social media, professional social media jobs are a natural fit.
If you want to be the star of your own social media efforts, you might want to try becoming a social media influencer. Or if you prefer to stay behind the scenes, you could thrive as a social media content creator, manager or strategist.
In terms of small business tax deductions, a social media business can provide write-offs such as:
- The portion of your rent or mortgage that pays for your home social media office.
- A portion of your internet bill, as well as part of your phone bill if you use it to talk to clients or sponsors.
- Part of the cost of your computer, plus any other devices you use to access social media for professional purposes.
- The cost of gas you use traveling to and from meetings.
- The price of items purchased for your social media work, such as products purchased specifically to review in a YouTube video.
Keep Costs Low with Small Business Tax Deductions
The standard tax deduction is great, but for entrepreneurs, the small business tax deductions provided by their work can be even better. Whether larger capital assets or small but frequent purchases, all those write-offs can add up to make a big difference.
And if you're struggling to make sense of your tax returns, we have a solution for that too. With our small business bookkeeping and accounting services, you can stop puzzling over calculations and get back to running your home business.
Carrie Buchholz-Powers
Carrie Buchholz-Powers is a Colorado-based writer who’s been creating content since 2013. From digital marketing to ecommerce to land conservation, she has experience in a wide range of fields and loves learning about them all. Carrie is fond of history, animals and beauty in equal measure. In her free time, she enjoys knitting, playing video games and exploring Colorado's prairies and mountains with her husband.
