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IRS Guidance on Home Office Tax Deduction

PER the IRS: If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes. 

If you are a contractor / self employed / Partner (K1), then you better pay attention to this important tax deduction.

This year when you go to file your taxes make sure to bring the following information related to your home office.

  • Rents Paid*
  • Mortgage Interest Paid
  • Real Estate Taxes Paid
  • Insurance Paid *
  • Utilities*
  • Repairs*
  • Association Dues*
  • Maintenance*
  • Travel*
  • Legal & Professional*
  • Commissions*
  • Management Fees*
  • Bank Charges*
  • Advertising*
  • Depreciation

*We do not need to see the support documents for most of these items, BUT you must keep for your records in case of audit. PLEASE only provide the summarized annual total spent per category. If you need us to review your support documents there could be additional charges.

The tax preparer will calculate the greater tax benefits between the 2 alllowable methods to calculate your home office deduction.

Method 1 = Simplified option + For tax year after 2012 per the IRS Revenue Procedure 2013-13, certain taxpayers qualify to take a prescribed rate multiplied against square feet to calculate the home office deduction instead of the Regular Method. This simplified method greatly reduces the need for substantiation and record keeping and can be easily calculated.

Method 2 = Regular Method + For tax year 2012 and prior, the regular method allows taxpayers to take a business use % of the total home expenses plus and direct expenses. This method requires a lot more record keeping and substantiation.

Let us know if you have any question on your taxes for your Schedule C sole propreitor business expenses or Schedule E passhtrough partnership unreimbursed expenses.

We’re here to help you along the way; meet your new CPA today.

Mortgage Interest Deduction Loophole

Greece vs. America – The Average American Could Be Worse Off

Greece is in serious trouble – but what about the average American? credit cardThe average US household carries approximately $16,000 of credit card debt; average mortgage debt $157,000; average student loan $33,000 (source http://tiny.cc/ee3q0x) … that is approximately $10,000 of interest per year :/

However, unlike Greece, if an American claims bankruptcy there is no reprieve from certain types of debt i.e. student loans or taxes which essentially creates a “debt prison”.

 

http://tiny.cc/u32q0x