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Feb 282016
 

How to have a retirement business from your home

Most retired owners prefer to work out of their home to keep expenses down, obtain tax deductions, and for just plain convenience. So you too can setup a a retirement business from your home. However, there are a number of things to take into consideration first.

home-officeZONING RESTRICTIONS

In many localities there are restrictive zoning laws designed to preserve the residential character of the area. If you plan on having lots of deliveries, making noises, or having customers visit you then you might run into problems.

In most localities you will also be required to obtain a local business license. The type of business license that you get, might alert them to zoning concerns as many activities are forbidden in residential areas even including just having an office.

If you handle food products you might not be able to use your kitchen. You will have to pass health inspections and even be required to take approved courses and obtain special licenses.

Also most localities do not let you have any hazardous materials in your home.

Check your public library for a copy of local zoning and business laws if you don’t want to talk to the city clerk.

If you rent your home, check the restrictions in your lease.

NEIGHBORS

The less aware the neighbors are that you are conducting a business out of your home the better you can avoid complaints which might prompt a visit from a zoning code enforcer.

Don’t attract attention.

That means no signs outside. And don’t park a truck with business advertising in your driveway.

NOISE

Be aware that working with power tools, paints, or solvents will attract attention. You might be better off renting a space is someone else’s commercial warehouse or garage.

VISITORS

Avoid having constant deliveries or pickups. Clients should have no need to visit you at your home. Meet customers at Starbucks or at the client’s premises.

TAX DEDUCTIONS

Running your retirement business from your home might allow you to take many tax deductions which will help lower your retirement spending.

The IRS says that it is perfectly OK to take a home office deduction but there are some requirements that must be met. This includes a home office room and, of course, an attic, basement, or garage used to storage of inventory or samples and the production of products. Generally there is no problem using separate non-attached buildings either.

Exclusivity

The IRS says that these rooms, attics, basements, garages, or other areas must be exclusively used for your business. If you have items like a TV, exercise equipment, personal clothes, and other non-business possessions in the same space, the IRS might disallow your deductions.

So don’t even think that you can use your den as your business office if your family also uses it to watch TV or as a game room.

Principal place of business

This area must also be used on a regular basis as your principal place of business.

You must spend most of your business time here performing work (exclusive of work on the client’s site) or doing administrative tasks.

Work

The work that you do in your home must be assembly, manufacturing, producing, receiving, and / or storing inventory of samples of products. Performing services for customers either in person or via the computer also count as work.

Administrative tasks

Administrative tasks are such things as billing customers, bookkeeping, making estimates, ordering supplies, setting up appointments, or writing reports,

DEDUCTIONS

There are two types of deductions for tax purposes. Direct and Indirect.

Direct deductions

Direct deduction as those expenses only connected with your business such as office supplies, business telephone, raw materials, business insurance, and equipment . Other direct expenses are computers, software, power tools, and business internet costs. You can take a deduction for the total amount spent on such business expenses.

Indirect deductions

You can also deduct indirect expenses connected with the home such as home mortgage interest (or rent), utility bills, and home repairs.
However, the amount of the deduction depends on the total amount of square footage of your home that is used in your retirement business.
For example if your business takes up 10% of the total square footage of the house, then you can only deduct 10% of these expenses.

Deductions not allowed

You cannot deduct expenses for your house that have nothing to do with the space used for your business such as lawn care or painting other rooms.

Other deductions

Some home expenses are already deductible whether or not you use your home for a business or not. This includes casualty losses, deductible mortgage interest, qualified mortgage insurance premiums, and real estate taxes.

Example of a deductible repair expense.

For example, a furnace repair benefits the entire home including your business space. So if you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair.

Be sure to keep detailed records of all expenses.

Insurance

Be sure to check with your insurance agent because some companies will not cover you if you use your home for a business. Also you might look into liability insurance to cover any clients or subcontractors (I don’t’ recommend that you hire employees) that might get hurt on your premises.

ALTERNATIVES

If you are unable to use your home for your business, you can always look into renting a small combination mini-warehouse and small offices for reasonable rent or rent space from a neighbor who has spare room in a garage, basement, or even a room where there are no zoning problems.

Links
IRS Publication 587 Publication 587
IRS Publication form 8829 Form 8829


 

Check out this link for more ideas.  Hundreds of Retirement Business Ideas.

For more information check out my books

How to Earn More Retirement Income: without having to get a job

Where to Find Products to Sell for Your Retirement Business

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