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Hello! Normally you would pay yourself, and then you would pay the mortgage from your personal bank account. Now, if you have a home office that changes the game a little bit. There is two ways to deal with a home office. Lets say that you use 20% of your home for business purposes. You will be able to write off your 20% of the electric, internet, cable, landscaping, etc, as well as 20% of your mortgage. You can do this on your personal return. The second way to write off an office in the home is to create a lease between you and your LLC. You use the same formula to find out the total percentage of home office use:
1) Total amount of sqft - Total amount of common areas = total amount of suitable sqft.
2) Total amount of sqft used for business / (divided by) total amount of suitable sqft. = percentage of business use.
Then you multiply the percentage calculated by your mortgage, and other "home office expenses". This gives you the monthly payment amount that you can use for the monthly lease payment you will receive from your LLC. The income that you receive from the LLC for the lease of office space is now considered passive income and not subject to the 15.3% employment taxes. And you have offsets for the passive income as well.
What I normally tell my clients is to subtract the amount of money that you will receive in lease income from your normal w-2 so that you can lower your w-2 taxes.
Now monthly your business will pay you two checks, one for your w-2 income, and one for the lease of office space.
There are other deductions that allow you to get tax free income from your business legally. If you want more information, contact me directly, or go to www.expensementor.com, enter in your email address, and you will receive a email that will outline 12 core business deductions. Hope this helps!
Pay all business bills through the LLC (including your wage). Pay all personal bills with personal checking account.1 of 1 people found this helpful
You have the LLC for two purposes - financial/tax and legal.
If you commingle funds/expenses you will open yourself up to audit issues with the IRS and allow people to "pierce the corporate veil" and go after your personal assets rather then being insulated.
Persoanlly, I do not believe it is worthwhile to take advantage of the home office deduction - it is a deferral rather than a true deduction, it is usually much smaller than most people think, and you will have tax recapture issues when you sell your house.