The Home Office deduction / IRS taxes

Feb 19

ROUGH DRAFT

If you have a home office…….. you can count some of your housing cost as a biz expense! This brings your profit down more, lowering your taxes. :)

There are two methods

Simplified
Actual Expense

Simplified is easy, though will not save you much money.
Simply put the total square feet into the tax software, and it will multiply it by $5 to calculate your deduction.
Example, if your office is 8 x 10 feet, it’s 80 square feet times $5 … so a $400 deduction. This might save you about $80-$120.

Actual expense … a little more work. Almost always a better deal.
You will need:

Square footage of your office
Square footage of your entire home
All costs of your home for the full year (see worksheets as example).

So…..let’s say we’re working with the same office, 8 x 10, so 80 square feet. And your home is 1200 square feet. You put these numbers into the tax software, and it calculate that your office is using about 7% of your home. This means…that we get to deduct 7% of ALL costs for our home for the year!

Example………

Imagine in this example, if you RENT

Rent for the year ………………….… 30,000
All utilities for the year …………. 6000
Insurance………………………………… 150
Total cost is ………………………………36,150
Your home office portion would be ……. 7%, or $2530
Saving you $500 - $700 in taxes

Imagine in this example, if you OWN

Mortgage interest for the year ………………20,400
All utilities for the year ……………………….…. 6000
Insurance……………………………………..…………… 1500
Property taxes…………………………………………….8000
Total cost is ………………………………………….……35,900
Your home office portion would be ……. 7%, or $2531
Saving you $500 - $700 in taxes

Here are some very EARLY BETA worksheets…………..

If you OWN

If you RENT