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 mean thousands of more dollars of mileage tax deductions. In 2014 you may deduct $1.12 for every two of the following types of miles you drive. The tax code allows for deductible mileage if you drive from one job directly to a second job. 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 mileage. 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, business entertainment, et cetera.
Again, these miles can add up to thousands more in tax deductions.
2. 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 $1,800, you will be able to deduct an additional $3,240.00 from your home business income. If you are in the 25% income tax bracket that will mean $810.00 more in your pocket annually instead of Uncle Sam’s.
Summary of Qualifications for Home Office Deduction:
In order to take the home office deduction your business must be a legitimate business. There are a number of 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 like manner in order for your endeavor to be considered an actual business.
Additionally, the office space in your home must be used exclusively for business (no personal use of the space). Personal use of your home office space disqualifies the deduction. Also the home office must be used regularly as the primary place for administrative and management activities of the business it is associated with. Or it may simply be a space set aside solely for storage of items used in your business (e.g. tools, inventory, etc.) As above, this is a summary of the exclusive use rules. 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