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  • home office tax deductions

    Hello

    What are the conditions required to get the home office tax perks (aka deducting part of the utilities, mortgage.....)? I am an employee of an organization but do have two side businesses (rental, supplements). Thank you

    Doc

  • #2
    Have a home office and 1099.

    Comment


    • #3
      Peds is correct in that it needs to be for a side business.  Your employment won't count unless it's required by your employer and even then you'd have not place to deduct it.

      You need to use an area of your home regularly and exclusively for business.  It doesn't need to be a whole room but your kitchen table won't work.

      The sometimes bigger perk of a home office is that you can count more of your driving as business miles.  Anytime you drive somewhere from your home (when you have a home office) for your side business it counts as a deductible business mile.  Without the home office it would likely be commuting which is non-deductible.

       

       

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      • #4
        I feel like taking the actual (as opposed to the simplified) home office deduction needs to be reconciled when you sell your home. I'm not confident.... But it was 1 more reason I don't bother & just take the simplified deduction. The others being not proportioning your home expenses.

        But I guess it's dependent on the size & value of your home. Just throwing this out there.
        $1 saved = >$1 earned. ✓

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        • #5
          Yes, taking the actual instead of the simplified means you'll have depreciation recapture on the sale of you home.  So instead of being fully tax-free a portion will be taxable.  But you did get the deduction all those years before you sold and the gain is an "unrecaptured 1250 gain" which is a type of capital gain.  The highest it will ever be taxes is 25%.

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          • #6
            I can't figure out how to edit my prior post on my phone, but this is what I was talking about. But it's very possible I'm over my head & completely wrong regarding actual vs simple home office deduction & selling your home.

            https://web.blockadvisors.com/home-office-deduction-2/

             

            (Now I figured out to switch to desktop view on my phone to edit my post.  And I accidentally liked my own post in doing so.)  But DavidGlennCPA got what I was trying to say.
            $1 saved = >$1 earned. ✓

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            • #7
              There's nothing wrong with liking your own post

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              • #8
                For physicians, who typically have homes/apt's with cost on the higher end, the actual expense method is almost always preferable. Nothing wrong with depreciating - if you don't ever sell, you got the deduction. If you do sell, you're breaking even. Big deal.

                FAQs about home offices for doctors

                Should I use SHOM?

                What is an Accountable Plan? - for s-corp owners with home offices
                Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                • #9
                  What percentage of the utilities/ mortgage/expenses do people having a home office for an LLC or side business typically claim? I have an LLC for my rental properties and I also used it for a book that I published on Amazon kindle ( made so far less than $10!!! ;-).

                  My properties are in a different state and I was told that if I drove my car once a year to visit the properties, I could deduct a portion of the car from my taxes as a business expense. Does this make sense?

                  Doc

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                  • #10




                    What percentage of the utilities/ mortgage/expenses do people having a home office for an LLC or side business typically claim? I have an LLC for my rental properties and I also used it for a book that I published on Amazon kindle ( made so far less than $10!!! ;-).

                    My properties are in a different state and I was told that if I drove my car once a year to visit the properties, I could deduct a portion of the car from my taxes as a business expense. Does this make sense?

                    Doc
                    Click to expand...



                    1. The % is proportionate to the space occupied by the HO v the living space of the home. You cannot claim a HO for rental properties.

                    2. Yes, travel to visit rental properties (assuming legitimate and not for another purpose) is deductible.

                    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                    • #11
                      I've always skipped it for fear of audit.  I'm an EMS medical director and spend a lot of time working out of my home.  Have a dedicated office.  I ended up taking the simplified deduction for 2018 out of simplicity.  I have a business license for my consulting business.  It's registered to my home.  I've been a fool for not taking it over the past 5 years.  Plus, since this is my primary business location for EMS, I should have been taking advantage of deducting mileage when driving from my home (business) to the fire department, hospital, state EMS office, etc. for EMS-related business/meetings.

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                      • #12
                        It's unfortunate how many people and tax professionals discourage taking the home office deduction because they think it's an automatic "red flag" with the IRS.  This is funny to me because the deduction is rarely more than $2,000-$3,000 anyway.  Even if it is a red flag, so what?  If it's right what do you have to worry about?

                        Audits are NOT as scary as people think they will be.  Even if the IRS makes some adjustments the worst thing that will happen is you pay a penalty.  Then you move on with your life.

                         

                         

                         

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