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** Auto expenses for actual miles driven or for all actual expenses related to business, including gasoline and repair costs.* Home office expenses.* Bank charges related to business.* Interest and fees on business debt.* Taxes such as sales tax on business purchases and real estate tax on business property.* Ongoing costs of doing business, including utilities, shipping, office supplies, advertising and marketing (including sponsorships), rental or lease payments (property and equipment).* Telephone and Internet charges.* Depreciation.* The purchase of office equipment and furniture and business vehicles.* Business gifts.* Professional fees (legal, accounting/bookkeeping, architectural,business consulting, and marketing consulting).* Seminars, classes, educational tapes or CDs, and conventions.* Trade-related journal subscriptions, books, and other literature.* Health-insurance premiums.* Moving expenses.* Charitable contributions.* Losses from theft, fraud, and business-property/contents damage not covered by insurance.
I write off home office expenses... paper, office supplies but not the space. The key for taxes is 'exclusive use' of the space for business and that counts for computers as well. I have comandeered two rooms in my house..computers and printers in both rooms...personal and business stuff everywhere...who would I be kidding? Yes I transact tons of business in both spaces...but exclusively? Nah. Could be more trouble than its worth.
The first tip (and the major factor that disqualifies many "home offices") is that the space must be used exclusively for your business. If that's the case, then the deductions are basically a pro-rata percentage of your total housing payments and expenses, based on square footage. You can link to most of the appropriate guidelines from http://www.irs.gov/newsroom/article/0,,id=108138,00.html
Hope this helps. Best wishes.
Techie, 3 good answers so far. Sounds like you have been working from home for a few years??
This is a perfect time to start for Next year, (this being Jan 2) Look at last years tax return for categories
of expenses. ALL business expenses (legitimate or not) should be written off.
Do you have an accountant?? How do you keep track of income and expenses??
You can use the computer, a diary, credit cards, calendar or even a show box.
My suggestion, keep improving the income and the gross profit.
Thanks for everyone's perspective and the distinction between business only spaces. I do have a designated space in my home in which I conduct business only. I also some times migrate over to the living room during the day to work, but obviously that space is used for both personal and work and should not be factored into my deductions. I will check out that IRS website link this weekend and am crossing my fingers that I have saved all receipts, bills, etc. to figure my deductions out. If not, I'll be wiser for next year.
The biggest portion of your deduction will come from things you probably have readily available -- mortgage or rent payments, taxes, insurance, and utilities.
I was ready to claim my home office deduction but my accountant ended up excluding "additional" deductions since my business was at a loss last year. She said although my deductions were all valid, i cannot anymore claim additional deduction since i already claim a negative Schedule K-1 on my filing.
My home office deduction is clear cut since i'm using my basement as my company storage space for all my inventories.I have it in one area only and based on that space i get a percentage share with respect to my house livable space.
In claiming home office deduction, does anybody know what tax consequents you have when you sell your home?
I consider the best person in the US for this type of thing Bernie Gartland, Gartland Law Offices.
This is his specialty. He gives free consultations.
He is geared to the small guy and considers himself a social worker who is an attorney.
In other words, his main goal is helping people. He is very busy so only contact him if you are serious.
He can also do your taxes and even helps people get out of tax jams from the past.
Not like those guys who advertise on TV or anything. Very reputable.
You can talk to anyone in his office, not just Bernie.
Tell him Kathy Hadley from Wichita sent you.
And NO, I don't get paid anything. I just want him to know.
If you qualify for the residential exclusion from capital gain you have to consider a sale as two separate sales, one for the residential portion and one for the home office portion as regards to the depreciation taken in prior years. The home office portion is subject to capital gains tax for the same percentage as that taken each year. Any gain would be subject to depreciation recapture at regular income tax rates for any prior depreciation taken. The remaining gain would be subject to capital gain rates. The residential part of the calculation is excluded from tax altogether.
A good tax strategy is to to find a way to not qualify for home office (not difficult, just say you don't exclusively use) 2 years prior to selling. Then the business home office part will qualify for residential exclusion (2 of the most recent 5 years) and only the depreciation taken in prior years would have to be recaptured. Everything would qual;ify for capital gain exclusion. You may want to have a CPA do your tax return the year you sell and you may want to develop a strategy similar to the above with a CPA several years before selling. IRS has been known to change the rules on us from time to time.
NYTaxguy is right on target.
Before you go to all the trouble of writing off home office expense an then having to worry about the tax recapture, do the math. In many cases the small tax savings are not worth the additional record keeping and tax prep work.
Absolutely DO keep track of all office expenses such as internet, office phone etc.
Planning any vacations soon? Try to schedule some type of work around/into your vaction and yoy may be eligible to write off part of the expenses. Ask your accountant for guidence.
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Every year my spouse always nags me - - did I write off all the possible deductions for working from home for the business? Admittedly, I do not write off everything possible. I usually can't be bothered to track everything, fill out all forms, etc.....however with gas prices rising, etc. I need to be more watchful of my expenses, and should write off any legitimate business expenses that I might of personally absorbed for the business. So I thought I'd ask everyone- - any tax deduction tips or advice for a home office?