Top 10 Home Business Tax Tips

One of the great virtues of starting a home business is the tax breaks you can claim. However, a popular belief is that claiming aggressive - and maybe slightly exaggerated - write-offs is a sure-fire way to attract IRS auditors. We'll look at some of the more popular home business write-offs as well as some tips on how you can legitimately claim them. (Homebodies can save big on their tax bill. Learn how in How To Qualify For The Home-Office Tax Deduction.)

Being audited without the records to back up your deductions can be a nightmare. The simplest way to avoid this unpleasant situation is to keep a daily log of your home business activities. Did you buy paper for the printer in your office? Write it down and either attach the receipt to the page in the case of a hardcopy or scan the receipt in if you are keeping a digital log. The same goes for mileage, phone calls and other costs, as well as payments received by your business.

Compiling your daily reports into a monthly tracking sheet will drastically shorten the time it takes you to get your taxes together, and it will have the added benefit of providing a snapshot of your business month-to-month.

If chatting with clients is a necessary (or helpful) part of your business, it may be worth getting a second phone line or a dedicated business cell phone, as both of these are 100% deductible. If you only converse with clients occasionally, you can still write off the costs by noting the dates, times and reasons for the calls and then circling the items on your regular phone bill to deduct at tax time.

On business trips, your travel expenses are 100% deductible and your food expenses can be deducted at 50% of the total. Keep all of your receipts because even things like dry cleaning and tips are considered a necessary expense when you're out pounding the pavement in new markets.

Your local day-to-day mileage incurred for business purposes can be written off as well, so give the same attention to tracking your mileage on smaller trips that you would to the expenses of an overnight trip. For many people, the mileage deduction is the more realistic deduction than first class tickets to New York. Remember, you have to be able to justify any trip and preferably show the payoff to your business resulting from it.