To some, being a work-at-home mother would be the ultimate dream; waking up and never emerging from the warm comfort of your pajamas, going for lunch at absolutely any time, and simply being at home from sunup to sundown. However, there is one distinct similarity and to some, a disadvantage, between a work-at-home mother and the average, everyday office worker—taxes! In the blue collar world, all you had to do at tax time was wait around for your employer to mail you a W-2 form, but that all changes when your career moves from the office to your home. Not to worry though, there are a few distinct, yet beneficial tax credits that are worth learning about.
As most moms will tell you, the actual role of “mother,” is a job all on its own. When that is combined with legitimate work, it can sometimes prove to be a daunting task to juggle both. On the bright side though, there is a tax credit associated with being a mom that can offer some alleviation. In fact, should a mom’s income fall into the middle income bracket (or below), then she is most likely eligible for the credit that offers up $1,000 per child. This credit can be claimed the moment a baby emerges from the womb until the time the child reaches the ripe
young age of seventeen.
A member of the, let’s call it a, “regular workforce,” working the dreaded eight-hour day, is probably used to a retirement plan sponsored exclusively by their employer(s). However, the work-at-home mom is her own employer; in other words, she would be responsible for the retirement plan. This just means investing into an Individual Retirement
Account or IRA. Even better is the fact that income does not play a role as all deposits made into a traditional IRA are completely deductible. The Saver’s Tax Credit, on the
other hand, is another potentially-wonderful benefit available to work-at-home moms as long as their income meets certain criteria.
Now comes the fun part—the deductions for expenses. The only reason I say that is because there are so many different things that you may not expect to be deductions, but in reality actually are; as long as they are work-related that is. For example, that elaborate desktop computer, dedicated phone line, and adequate accounting software for your new home office are all deductible because they count as business expenses. Another good example would be that lavish lunch you took with your marketing friend who is supposed to collaborate with you to boost the exposure of your home business. Business-related expenses can encompass a diverse spectrum of purchases; therefore, the subject is definitely worth researching or consulting about with a tax specialist (which also may be tax-deductible).
When you consider the credits mentioned above, the idea of working-from-home becomes a little less scary, at least financially that is; juggling a career from home with the daily obligations of running a family, can lead to an immense amount of stress otherwise. So when the tax man comes knocking sometime at the beginning of the year, don’t hide behind the couch. No, instead arm yourself with these essential tax credits and have Mr. TaxMan catering to your every whim.
Great post…I try to keep track of EVERY little thing. I keep every receipt. And keep it all up to date quarterly and it seems to go fairly smooth for me. But I still find it scary!!!
This is a great article for my wife, as she has a home business for her upcycled, handmade jewelry line. We’ve been hit with the tax monster before, so we’re becoming more wise to some great ways to reduce our taxation.
My husband just started his own business working from home. Horrified at how much in taxes we are having to try to pay. sigh.
Yes, you must, must, must keep track of everything! Even those miniscule things that you think won’t make any difference just might. That also means being ridiculously organized record keeper, but spread sheets and personalized file systems can make a huge difference!
Great post. I also work from home but for an employer who takes out my taxes and has a 401K plan. I still struggle with what, if any, tax breaks I have for using my home as my home office. I haven’t taken any, yet but plan on actually looking into it this year.
Write down everything you spend and keep your receipts. I am Canadian but at least here if you have a designated office space for your business you can write off the % of square footage of your bills. For example if my office is 10% of my square footage I can write off 10% of hydro, phone etc. I created this template for blogging expenses but you can use it for home too.
What a great article, I am lucky to have a fantastic accountant, but I still learn a little all the time!
Really like the post – great ideas that I had not thought of before and makes it easier to think about working from home. My commute now is dreadful and I only get about an hour for lunch and have to work from 8:30-5:30 and the drive home is worse. Then add in gas and time away from my family – don’t get me started. I also have doctor’s appointments, which really aren’t a problem, except if I am not here – I don’t get paid – so I am always looking for other opportunities, thanks!
This is a little different conversation. I was a stay at home mom for years. I was never paid nor did I work. The reason I’m bringing this up is because when my kids were 9 and 12 I ended up paralyzed. I couldn’t get disability because I was short a few hours. My suggestion to anyone who stays home and doesn’t work is to get a salary from your spouse and pay taxes on that salary. I missed out on a lot of benefits by not having worked. I hope this is helpful.
Thanks for sharing Charlene!
This was pretty informative; thank you.
This is very good info;thanks for sharing.