I do marketing work, facebook, direct mail, etc. for my physician spouse. Wondering if it makes sense to step up a home based business and have the practice pay me (and maybe get a couple more customers). Given the tax deductions available, although complicated, seems like it might be a good idea. Anyone have any experience with this?
What’s the point of the LLC? I’m not hearing much liability there, at least until there is a client beyond his/her spouse.
I also don’t think setting up a home office is the most important aspect of this. The home office deduction is generally pretty small because most of us aren’t willing to dedicate a significant portion of our house exclusively to the side business. I don’t take it at all, for instance. There’s nothing in the house that only gets used for WCI stuff.
I would, however, like to hear why the SHOM sucks. I haven’t heard that before. I kind of applauded it when it came out for simplifying things, but if it means leaving too much money on the table, maybe it’s too simple.
I guess you didn't read my article. We run every home office deduction both ways and I've only had one come back saving taxes with the SHOM since it came out. But, again, that is because our clients tend to have expensive houses. The SHOM is skewed to screw clients with more expensive houses because it doesn't allow for depreciation. And we run it both ways b/c the IRS will not allow you to go back and amend once you realize what you've given up. Didn't you realize there was a catch?
You have a point, of course, about the SE taxes, but the OP was talking about taking on more clients. Sounded to me like she was considering legitimate entrepreneurship.
I also don’t think setting up a home office is the most important aspect of this. The home office deduction is generally pretty small because most of us aren’t willing to dedicate a significant portion of our house exclusively to the side business. I don’t take it at all, for instance. There’s nothing in the house that only gets used for WCI stuff.
What applies to you doesn’t apply to the rest of the world. Our clients tend to have expensive houses with lots of big rooms available for nice home offices. Not all of them have (5?) kids filling up all of the bedrooms. Sorry you can’t find space to run your 7-figure business out of one and deduct a proportionate amount of HO insurance, utilities, R&M, RE taxes, mortgage interest, and depreciation, but it might be worth more than you realize.
I also don’t think setting up a home office is the most important aspect of this. The home office deduction is generally pretty small because most of us aren’t willing to dedicate a significant portion of our house exclusively to the side business. I don’t take it at all, for instance. There’s nothing in the house that only gets used for WCI stuff.
What applies to you doesn’t apply to the rest of the world. Our clients tend to have expensive houses with lots of big rooms available for nice home offices. Not all of them have (5?) kids filling up all of the bedrooms. Sorry you can’t find space to run your 7-figure business out of one and deduct a proportionate amount of HO insurance, utilities, R&M, RE taxes, mortgage interest, and depreciation, but it might be worth more than you realize.
I guess the counter argument is that if you have space in your house that you only use for a business that didn’t even exist a year ago, that you bought way too much house. There are very few home businesses that can’t be run in space used for something else at other times. I’d rather have full use of my house than a minor deduction, part of which is recaptured eventually and part of which might go to someone else to spend time taking care of the paperwork on it.
I think people really need to run the numbers on this deduction. I mean, if you have a 5000 square foot house and you dedicate a 10×10 room to your office, you’re only getting to deduct 1/50th of your home expenses. Even if those expenses are $50K a year (which has gotta be 3-5 times what mine may be) that’s a $1000 deduction, so $500 off your taxes. Don’t pay an extra $8K in SS taxes to get a $500 deduction.
And why are you assuming the OP is a she? Sexist!
that’s a $1000 deduction, so $500 off your taxes. Don’t pay an extra $8K in SS taxes to get a $500 deduction.
Even if those expenses are $50K a year (which has gotta be 3-5 times what mine may be) that’s a $1000 deduction, so $500 off your taxes.
I doubt your intuition is wrong. I’m mostly just making fun of how often I’m called out by readers for being sexist for doing something similar. Maybe domodomo will return to the thread and let us know.
If you read carefully, I’m pretty sure I never said “$500 deduction.” Here’s the direct quote:
Even if those expenses are $50K a year (which has gotta be 3-5 times what mine may be) that’s a $1000 deduction, so $500 off your taxes.
that’s a $1000 deduction, so $500 off your taxes. Don’t pay an extra $8K in SS taxes to get a $500 deduction.
I doubt your intuition is wrong. I’m mostly just making fun of how often I’m called out by readers for being sexist for doing something similar. Maybe domodomo will return to the thread and let us know.
If you read carefully, I’m pretty sure I never said “$500 deduction.” Here’s the direct quote:
Even if those expenses are $50K a year (which has gotta be 3-5 times what mine may be) that’s a $1000 deduction, so $500 off your taxes.
I’m not denying I don’t get by with a few things that you don’t, but it works both ways.
What do you mean, if I read carefully?
that’s a $1000 deduction, so $500 off your taxes. Don’t pay an extra $8K in SS taxes to get a $500 deduction.
Why don’t you just go back and edit your post and take it out? Then I wouldn’t have to read so carefully. It’s making my eyes hurt.
A $1000 deduction, for someone with a 50% marginal tax rate, means $500 off their taxes.
The OP may or may not be REALLY starting a business. In reality he/she is helping his/her spouse with their business. The amount of income is likely the same for the couple no matter who makes it, but if the wrong person makes it the tax bill is higher. Now if he/she decides to do this for someone else’s practice, then sure, there’s additional income for the couple.
I’m not saying NOBODY has any room in their house that they can dedicate to doing nothing with but Facebooking and direct mail, but when most people really think about it, they’ll realize that’s a job that can be done from the recliner in the family room. The whole “home office” is just a tax scheme.
The reality is that most people use that space for both their business and whatever else they want, then lie to the IRS in order to save on taxes. I figure if you’re going to lie to the IRS, might as well lie big and I can think of a lot more profitable lies than a home office deduction.
But hey, run the numbers yourself and if you figure you can get yourself a $4K deduction, I’m all for it. Just remember the rule- regular and exclusive use of the space for the business. And make sure you’re not paying $8K in SS taxes to get a $1K deduction which is what I suspect may be going on here.
And why are you assuming the OP is a she? Sexist!
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