I am forming my own consulting company working from home this year. I am suggested to use sole proprietorship as a struction. I got one client now and will be paid roughly $36,000 a year. The company is very close to where I live and I only go in when needed. The problem is that I have other income which put in the 45% and higher tax bucket to start with. Should I buy a car for this company? and I am thinking to set up an office at home and buy some office furniture, add internet, and home phone. Of corse, I will look for other opportunities as well. Any suggestions as things to do so I can get legitment tax benefit from this income? Thanks

A caution of advise is that it is always prudent and safe nowadays to claim only legitamate expenses when filing your personal tax return. With the current IRS audit environment, an audit adjustment can be potentially very expensive.

However, that should not deter you from claiming your allowable business expenses. An Office at Home usually results in additional IRS scrutiny, so please follow the rules regarding claiming an Office at Home.

Now, for additional ideas and suggestions please refer to this link that provides some of the typical expenses that a consultant may be able to claim.

Tax savings strategy for self-employed IT consultant

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