Hi, Mark Kohler here with another tax and legal tip. Let's talk about the home office deduction. I love this deduction and if you have a small business, you should take advantage of it. However, every older CPA out there cautions against it, fearing an audit if the deduction is used incorrectly. But there are ways to do it right, and you need to know the rules. Before we dive into the two methods for writing off the home office, let's discuss the criteria. There are actually two criteria to consider. The first is the exclusive rule, which means you must have a specific area in your studio apartment or house that is solely dedicated to your small business. The IRS allows some flexibility here, knowing that sometimes you may use the space for personal purposes. However, the area still needs to be primarily used for your home office. The second criterion is the principal place of doing business rule. This refers to the place where you primarily conduct your business, meet clients, and run the show. Recent cases have allowed for an administrative home office exception, where you can have a separate office outside your home for meeting clients, while handling administrative tasks at home. Consult with your accountant to understand this exception and how it applies to your situation. Now, let's move on to the two methods. The first is the traditional method, which has been used for years. With this method, you calculate the percentage of your office's square footage in relation to your total home or apartment's square footage. This percentage is then applied to your utilities, mortgage interest, depreciation, and other related expenses. Ultimately, this leads to the home office deduction on your Schedule C form for sole proprietors. Keep in mind that if you use the traditional...
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Simplified home office deduction 2024 Form: What You Should Know
Simplified Home Office Deduction — IRS Sep 19, 2024 — Use Form 8829 for the simplified home office deduction. For more information about the simplified method, see the Instructions for Form 8829 You can use the simplified method while claiming deductions for business travel, business office, and travel for your business as your home. See “Simplified Method for Home Office Deduction” in the home office section. Who is required to use the simplified method to claim a home office deduction for their self-employment income? Home Office Deduction — TurboT ax Jul 18, 2024 — Prior to the Tax Cuts and Job Act (TCA) passed in 2017, employees could deduct reimbursed employee business expenses including the home office. What home-related expenses should you deduct as a home office deduction? You may be able to get a reduction in your tax if you itemize your deductions. If not, make sure to claim all the necessary expenses. Simplified Home Office Deduction — IRS Sep 19, 2024 — Use Form 8829 to claim expenses for business use of the other home. For more information about the simplified method, see The Home Office Deduction — TurboT ax website. May 2024 — This new section in the Simplified Home Office Deduction is for the business use of the home. Deduct this amount on line 8 of your Schedule A. What are the restrictions as to how the simplified method is used? You can claim the deduction of expenses for business use of your home even if you don't have an office in your home. You must use the home for your business. The office does not have to be in your home. You can deduct office and home expenses that are the same on line 9 of your Schedule A. You cannot deduct more than half of the total expenses you have. For example, if you own an office, you cannot earn more than what you would have earned if you had an office. Also, you cannot deduct home office expenses. Also, any expenses you use for business purposes while away from home must be in addition to the business use of your home. That is, you can use the home for the sole purpose of paying for your business expenses, but, if you also use it for other purposes, those purposes must be included in the business expenses, even if you do not earn more income there.
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