Home Office Deduction – Get It and Save:
Beside the fact that you can wake up and be at work by just walking down the hallway here are some other perqs….
- 1. Deduct your mileage to a second or third job or other place of business. A legitimate home office can meanthousands of more dollars of mileage tax deductions. In 2018 you may deduct $1.09 for every two business miles driven. If you drive from one job directly to a second job that is business mileage. So, if you have a home office for one of your jobs and you drive to a second job from there it means that mileage is deductible. That is opposed to driving from home without a legitimate home office to your job and back. That would be commuting Commuting mileage is NOT deductible.
Other mileage you can deduct, if you have a legitimate home office, is going to get supplies, meet with clients, the post office for business, business meals, et cetera. If you were to drive 10,000 of the deductible mileage above it would mean an extra tax deduction of $5,450 which would translate to annual tax savings of $1,308 if you’re in the 24% tax bracket.
- Write off a portion of your household expenses– such as rent, utilities, improvements, mortgage interest, depreciation, insurance. As an example – if your home office is 15% of the total square feet of your dwelling and your monthly rent, utilities and insurance add up to $1,900.00 you will be able to deduct an additional $3,420.00 from your home business income. If you are in the 24% income tax bracket that will mean $821 more in your pocket annuallyinstead of Uncle Sam’s. Add that to the mileage deduction above and that’s a tax savings of $2,129 per year.
Summary of Qualifications for Home Office Deduction:
In order to take the home office deduction your business must be a legitimate business. There are factors that determine the difference between a hobby and a business which need to be examined on a case by case basis. But, in summary you must have a profit motive and spend time and effort towards making a profit in a business.
Additionally, the office space in your home must be used exclusively for business. The home office must be used regularly as the primary place for administrative and management activities. Or it may simply be a space set aside solely for storage of items used in your business (e.g. tools, inventory, etc.) These should be examined also on a case by case basis.
As always, we’ll be glad to answer any questions you may have. Call us at (310) 858-4996 or write to info@RichmanTaxCuts.com