Home Based Business: Your Ultimate Tax Shelter

J. Stephen Pope

Home Based Business: Your Ultimate Tax Shelterby Starting and operating your own home based business isthe ultimate tax shelter.Although this article has been written from a Canadianincome tax perspective, the principles should be practical in other tax jurisdictions.1. Non-Deductible Personal Living ExpensesAll of us have expenses that we incur in everydayliving.Either you rent an apartment or house or you own yourresidence. Utilities, insurance, rent, mortgage interest, property taxes, and maintenance and repairs are typical costs of operating your home.Likely, you have a vehicle which also consumes largeamounts of cash.Add to this, dining out, entertainment, gifts, alcoholic beverages, office supplies, telephone andmany other expenditures, and you have a significantcash outflow.In most cases, as an employee, retired person,investor, student, or homemaker, few of theseexpenses are tax-deductible to you.This means that you must earn a considerable income, pay your income taxes first, and then use what isleft to pay all your expenses.Some employees may be able to write-off some oftheir employment related expenses, if such arerequired by their contract of employment. However,even in this situation, the tax deductions are very limited. 2.

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