Home office tax deduction

Home office tax deductions can save you thousands

Home Office Tax Deductions Defray Living Expenses

Home office tax deductions offer so many tax advantages it makes me wonder why more people

Home office

Home office

do not start their own business.  One of the rewards of being a business owner is cutting back on the daily commute grind.  The home office is a way to transfer some of your living expenses to your business and get a deduction.  Some of the benefits of the home office include:

  •  Deduct a portion of mortgage interest, taxes, insurance, utilities
  •  Repair deductions – repairs on your principle residence are not deductible but office repairs are.
  •  Pest control
  •  Office equipment depreciation
  •  Building depreciation

Home Office Tax Deduction Limits

These amounts really add up.  The amount of the deduction is limited to the income from the business.  If you no income, you do not have a deduction.  If you have little income, you have little deduction.  You may think, “I do not make any money now so the home office deduction is not worth it.”  That thinking is faulty.  I always say, “Every deduction is sacred.  Every deduction counts.  Deductions shall not be wasted.  Oh make the tax man shout.”  Claim the deductions now and every year.  They can be forwarded to future tax years in perpetuity until you do have income to attack.  If you are in business, you intend to make money.  When you do, limit the amount the tax man taketh.

Example Home Office Tax Deduction Calculations

 The table calculates the home office deduction of 10% office use of a 1400 square foot home.  You paid $140,000 for the home. 

Item Gross Expense Office Percentage Deduction
Interest $5,136 10% $513.60
Property Tax $2,400 10% $240.00
Insurance $800 10% $80.00
Utilities $3,200 10% $320.00
Depreciation $4,364 10% $436.40
Repairs – whole house $3,000 10% $300.00
Repairs -office $400 100% $400.00
Total $1,854.00
25% tax Bracket $463.50

I know I would rather have the $463 in my pocket rather than the governments. If I deferred this amount for two years, it will still be a tidy sum and will be added to the intervening year’s deductions.

Vehicle Tax Deduction

Commuting to work is not considered business miles.  Eliminating the commute will lower the number of personal miles on your vehicle.  You benefit from a higher percentage of business use and save yourself the wear and tear on your vehicle and your stress.  I certainly do not miss sitting in traffic 90 minutes a day.

DISCLAIMER

This article is for training purposes only.  Jody Wall does not warranty the accuracy of the training.  It is not intended to be legal or accounting advice.  Seek competent consultation for your particular situation. Readers assume all responsibility for their decisions.

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