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Home Office Space / Equipment Tax Write Off

 
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benne13

posts: 13

Dec 04, 2008 7:20 AM ET    Quote  Report Abuse
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Hello,

 

When you home is your "office", what items can be included as a business tax write-off?  Can the normal office equipment (Computer, printer, internet, cellphone, etc..) along with a portion of the house be included as designated space and or items solely for your business?

 

This question may have been asked before, so I apologize in advance.

 

Thanks,

~Jeff

 


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EngineersCanSell

posts: 163

Dec 04, 2008 8:31 AM ET    Quote  Report Abuse
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I`m sure an accountant will chime in so take my words with a grain of salt.  But I believe you can take the percentage of your house that your office occupies and deduct all your normal bills (electricity, heating) by that amount. 

For example if your office takes up 5% of your house`s living space, you get to deduct 5% of your utilities at tax time. 

As far as equipment goes, I believe you need to be using them 100% for business to deduct them.  If you get audited and they ask what percent you use it for personal use, I think your answer needs to be zero.

mkoloch

posts: 1

Dec 04, 2008 11:17 AM ET    Quote  Report Abuse
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I`m in PA, so not sure if things vary by state. With my current job I am required to have a home office. So with that being said, your tax deducts are based on the space as said above. Your bills for energy, water, etc... can be deducted based on that percentage. However, I ran into a snag with the equipment. If your computer, printer, scanner, TELEPHONE is used for purposes other the work/making money (i.e. kids surfing the internet), that also will be a deduct of the percentage. Once the equipment is bought, thats the only chance you have for a tax deduct.

I have separate equipment for work, just keeps my life more simple.

WebJunky

posts: 549

Dec 08, 2008 12:56 AM ET    Quote  Report Abuse
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also make sure to look into the section 129 deduction...check with your CPA at least.  this allows you to forego the depreciation and expense the entire asset in the year of purchase (up to a certain amount).
 
good luck


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nevadascul

posts: 640

Dec 09, 2008 12:59 PM ET    Quote  Report Abuse
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It`s tough to deduct home based business expenses.  I talked to my tax preparer about this.  First, is your home office actually an office or a room where you conduct business?  Is it used for other purposes?  Your computer and supplies if used for other purposes may only be partially deductible.  You may have to calculate how much time your computer is used for business for example.  If you have a dedicated phone line for your business, you may be able to deduct that expense.  But, if you are just using your regular home phone to occasionally conduct business, you may only be able to deduct a portion of your bill.  It all comes down to determining whether the item is used exclusively for business, or it`s a shared use.  If it is shared use you may not be able to deduct the cost or not get enough to make it worth the effort to deduct.

You can deduct publications that are specific to your business.  For example, I used to buy magazines on warehousing when I ran a warehouse.  Writing magazine might be tax deductible.  I was also able to deduct the cost of my web site and yearly subscription to an on line writers market.

But the best advise has already been posted, see an accountant.  An accountant can tell you what is and isn`t deductible.  They can also tell you what records you need to set up to justify your deductions.
nevadascul12/9/2008 1:08 PM


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TaxLadyEA

posts: 5

Jan 24, 2009 12:58 PM ET    Quote  Report Abuse
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If you are doing this on your own.. without talking to a tax professional.. you are more than likely going to mess up.
 
Home Office done correctly.. not a problem.
Home Office done incorrectly.. a major audit area.
 
It doesn`t save money to keep you out of a hole.. it costs to get you out...
Yeah.. we do that too  :o)  :o)


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Warmest regards, Patricia Masters, EA EA = Enrolled Agent = only tax professionals who receive their license to represent taxpayers (you) before the IRS from the U.S. Treasury.
kywomanjt

posts: 64

Jan 24, 2009 11:43 PM ET    Quote  Report Abuse
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head warning from above, seek tax consultant help, or at least call  IRS at 1-800-TAXFORM and request  copies of Pub.587 Business Use of Your Home, Form 8829, and Form 8829 Instruction book.    Do not listen to individuals who brag about all what they claim as a home business expense; because they may be claiming something, but not necessarily "entitled" to claiming that item as a deduction; and they just haven`t been caught up in an audit yet.
 
Just remember, IRS can take up to 3 years from the date you filed your tax return to do an audit on it.  So if someone tells you they claimed something last year and didn`t get caught; they just haven`t been caught yet;  they still have 2 more years to worry about that, before they can truthfully make that statement.  And if they repeated claim the same false deductions, when they do get caught, IRS will go back and pull prior year returns and audit them at the same time.  So don`t take any body`s word for what you can and can not claim as a deduction, unless it is IRS or an enrolled tax agent.
 
Trust what I say, as I have over 30 years experience working for IRS and most of it was in the Compliance Division where they do the Audits, Criminal Investigations, Tax Shelters/scams and Collections.
 
TaxLadyEA

posts: 5

Jan 25, 2009 12:10 PM ET    Quote  Report Abuse
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kywomanjt   and I cannot stress this enough... If not done properly... you stand a high risk of losing under audit. 
 
As it is `home office deductions` are more highly scrutenized by both the IRS and the various states... claiming it can make you more susceptible to an audit.. BUT.. done correctly.. you will walk through (hopefully) with a `no change` audit.
 
You have a right to take all deductions LEGALLY allowed.
 
Number one rule?   Good recordkeeping and documentation!!
 


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Warmest regards, Patricia Masters, EA EA = Enrolled Agent = only tax professionals who receive their license to represent taxpayers (you) before the IRS from the U.S. Treasury.
WebJunky

posts: 549

Jan 27, 2009 8:26 PM ET    Quote  Report Abuse
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kwomanjt - i think it would be good if you can provide a quick synopsis (bullet points?) of common mistakes peolpe make that trigger their tax returns for audit.  personally, i just don`t know how the IRS determines what to and who to audit?  is there a rule in place that makes them take certain actions ?

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kywomanjt

posts: 64

Jan 28, 2009 11:06 PM ET    Quote  Report Abuse
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WEBJUNKY,
That would be great if someone could do that, but there are changes every year, and multiple changes through  out the year.  There just are way to many things that kicks a return out for audit.  Basically to help prevent an audit, and to come clean through an audit; just take what ever deductions you are legally entitled to, no cheating, or stretching the truth,  and back  up everything you claim with proper documentations and record keeping.
 
I can tell you that alot of the returns kicked out for audit; are just a percentage randomly selected by the computers.  Washington may tell IRS to audit X% of returns filed this year, or to concentrate heavily on certain tax deductions, such as several years ago, they concentrated heavily on the Earned Income Tax Credit, or a particular Tax Shelter, or look at all returns prepared by a particular Tax Preparer.  It changes every year, and several times through out the year, and Washington mostly dictates which returns to look at.  On an individual basis, your return will probably kick out for audit if you show a drastic difference in previous years returns.  Its the individual actually telling the computer "HEY, look at me".   ie: you`ve never claimed a deduction for a charitable contribution, and then this year you show you donated $25,000 and your taxable income was only $50,000.  Or you`ve always claimed 2 dependents, and this year you`re claiming 6, anthing like that looks questionable, and the computer will kick out the return for audit.  And even if it does, and you have the proper documentation and record keeping, you`ll have no problem with the audit.   Sorry, I can`t tell you what you really want.  There is nothing written in stone; mostly just random selections, or questionable items to be looked at for clarification and/or justification.
 
If you`ve never done this in the past, I recommend using one of the companies listed on the IRS web site offering the free e-filing.  Everyone this year qualifies for the free e-filing, regardless of your income.  You can even use their software to complete a return; and the software prompts you with all sorts of questions, to ensure you are claiming exemptions you are entitled to.  Also the questions, or the forms that the questions take you to, will prompt your memory for deductible items you would not have thought of on your own.  But, if ever in doubt, always consult a tax professional.
kywomanjt3/4/2009 1:31 AM
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