Tell your future business partners that they can put an additional $5,000 of spending money in their pockets this year (and every year) if they start their own home-based business - whether or not they succeed in building a downline or selling products. How is this possible? As home-based business owners, they'll be entitled to a sackful of tax breaks that will enable them to reclaim thousands of dollars in taxes - dollars normally taken by the IRS out of their day-job paychecks.

Tax laws that allow home-based businesses and other small-business owners to garner substantial tax breaks are the same laws that benefit Microsoft and MCI. The only difference between home-based businesses and Fortune 500 companies in the eyes of the IRS is their size and the fact that home-based business owners can also deduct many home office and living expenses.

What is deductible by a home-based business owner?
1. When you discuss business with co-workers and friends at lunch or dinner, your meal is 50 percent tax deductible. For that matter, so are other expenses relating to entertainment focused on building relationships with future business partners, and downline or upline friends. Theater and sports event tickets are 50 percent tax deductible, too.
2. Money from Your Car
3. Automobile mileage is deductible between your home-based business office and a meeting where business is discussed. That includes the meals mentioned above, or an opportunity meeting - or even a golf outing with friends who you discuss the business with.
4. Travel is deductible, whether it's to an industrial center or an island resort, if the purpose is to hold an opportunity meeting, to discuss business with other travelers, or to attend a seminar. Travel is deductible for a wife or husband whose presence is helpful in showing the plan.
5. You can also deduct wages paid to your children for help in the business, and if those children have no other sources of income, all wages under $4,000 per year are tax-free. It's a great way to save for college with Uncle Sam's help!
6. Pay With Pre-Tax Dollars
7. You can pay for expenses like braces, eyeglasses, and visits to the doctor with pre-tax dollars if properly structured through a qualified medical-expense reimbursement plan.  This is easy to do with standard forms. (Ask your accountant.)
8. Home computers, fax machines, telephones, office supplies, and office furniture are also fully tax-deductible. But there's more.

The IRS's only requirement is that you legitimately treat your home-based business as a business, not a hobby. That means regularly working it. What counts as "regularly working" your business? Taking the actions you ask your business partners to take: attending meetings, regularly presenting the plan, and teaching others to do the same will prove to the IRS that you are truly running a business and not engaged in a hobby.
If the people you sponsor actively follow your guidance, they should make money. But even if they don't, the IRS will recognize their right to home-based business tax breaks (just as it does yours) if they properly document their activities and costs. The only catch is that expenses directly related to your home office (rent, utilities, etc.) cannot be used to generate a tax loss. They can only count against your business profits for that year and carry over to negate profits in future years, when your business takes off.

Documentation is a simple process. It merely means saving receipts and writing down in your day planner all business-related activities, business-related expenses and any revenues you earn. Consistent record keeping will prove to the IRS that you are truly running a business and not engaged in a hobby.

What do these records look like? They're simple. Just writing down whom you spoke with about the business, where you went in pursuit of your business, and what you spent in the ordinary course of conducting business, will provide you with the proper documentation and a sea of deductible expenses.

For a maximum investment of five minutes a day, the time spent record keeping is worth a minimum of $5,000 in tax savings. That's a little over $232 per hour of tax savings for the time you spent keeping track of your activities and expenses.

What do these records look like? Here's a sample from a day planner.

8:00 AM:
Breakfast meeting with prospect Sarah Jones. Presented products. Breakfast cost $14.50. Mileage from home office to breakfast: 15 miles. Ate at Chock Full o'Nuts.

12:00 PM:
Lunch with prospect Jim Smith (a co-worker). Discussed how great I felt using the product. He's considering it. Lunch cost: $5.75. Ate at Joe's.

5:30 PM:
Meeting with Sam Lee (a friend). Discussed the plan. Snacks cost $16.00. He said," the plan makes total sense, I’m in".

7:00 PM:
Attended Opportunity Meeting. Mileage to event: 10 miles. Mileage to next event: 15 miles.  Watched presentation, Tammy Johnson, and lent support.

8:30 PM:
Attended professional basketball game with Hank Harris and our wives. Harris is considering the opportunity. Cost for tickets: $60.
 

Help From Uncle Sam

Which of your ordinary lifestyle expenses are deductible when you own a home-based   business? If you legitimately work your business in any of the following ways, you can write it off. Check out the math:

$500: Lunch with co-workers is deductible. Four dollars per day times 250 workdays:  $1,000. Multiplied by the 50 percent deductible, that equals $500.

$1,500: Travel expenses for you and your spouse to vacationland, if you hold an opportunity meeting  (the meetings could be with the friends you are visiting), and if both you and your spouse participate.

$1,800: Home-office deduction ($150 per month) for use of the spare room in your house, out of which you operate your home-based business. Make sure to meet there sometimes with clients or prospects, to document the meetings, and not to use the office for any other purpose.

$1,500: Automobile mileage from your home office to your day job or other places where you encounter potential future business partners and discusses the plan. At 30 cents per mile, 20 miles round trip times 250 days equals $1,500.

$8,000: Tax-free wages for two kids without other jobs who help in your home-based business. That's two children times $4,000 per year paid to accounts for college, weddings, etc.

$2,700: Health insurance for your family. (This assumes your spouse is an employee of your home-based business who chooses to include you and the kids on the plan.)  Premium of $225 per month multiplied by 12 months equals $2,700.

Altogether, that's $16,000 in tax-deductible expenses. If your tax bracket is 35 percent of your income, counting combined federal and state taxes, your deductions would generate a $5,600 cash refund from the IRS.

Remember: To deduct the above expenses, you must actively work your business in the meals and trips mentioned above and keep records.

Arbonne does not give tax advice.  It is recommended that you consult your accountant or tax advisor in applying these concepts to your business.