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FAQ

Can I write off my condo fee as a business expense if I use 1 room in my condo as an office?
yes, you can provided the area (room) is solely for business purposes. So depending on the type of work you do in your Condo (LOS ANGELES GREATER AREA. ABOUT 20 MILLION PEOPLE IN SIZE) is building many loft Condo with just that intention, the upper area for living and the lower area for business).Most cities required a business license, but the catch-22 is you must obtain aN Occupancy permit to show the city what is the use for. (i.e. garage for repairing cars…probably not permitted. But, a computer based business…fine. A business that would require clients to come to you…maybe, depending on parking.How to determine the amount (%) of use towards the area used. This is exactly, SIZE MATTERS. TAKE A PERCENTAGE OF THE TOTAL area used over the total area. (DON’T FORGET TO INCLUDE RESTROOM IF YOU HAVE MORE THAN ONE, AND MAYBE $$ HOUSEKEEPER THAT CLEANS ONCE A WEEK (1099 IF YOU PAID HER MORE THAN $600 PER YEAR, AND THAT WOULD BE ONLY FOR THE WORK SPACE CLEANED..NOT THE ENTIRE HOUSE! Prorate all utilities based on the above formula.Per IRS regulations, if it isn’t permitted by local authorities, than it not deductible. But I have never run into an AUDIT (verify) that a place was legal.OR, take the safe harbor (a place that soso, but safe) and use a flat area used over total area in square ft, but not to exceed $1500.00 per year. One last things is don’t forget the 2 years losses out of any 5 years (rule of thumb) rules.Semper fi,THJ
What is the correct documentation needed for a home office deduction when you are in charge?
Depends on company and employment structure to some degree, but generally, we have a voluntary tax code. You supply the numbers the feds don't already have, and unless audited you don't necessarily have to prmore documentation. Certainly, for a tax professional to prepare your return, and to simply do the legal and smart thing, you should keep receipts that are associated with your work-from-home and ethe number of hours relative to your total work that are performed at home and the relative square footage that you're using exclusively for that work. With that data any tax preparer can help you arrive at a number to put on the form (voluntarily). As long as it looks reasonable, I'd not anticipate problems.
I'm a British writer-producer who's recently decided to relocate to LA permanently... what are the tax pros and cons of operating from my home office v. a business residence? Obviously, I would like to conserve funds as much as possible until I get up and running!
Beginning this year, the Internal Revenue Service allows calculating a home office deduction in two ways.The new, simplified option lets you multiply the square footage of the home office (up to 300 square feet) by $5 to determine the deduction, which is capped at $1,500.  To claim it, you complete a short work sheet in the tax instructions and enter the result on your tax form:If you're self-exmployed, you claim it on Schedule C, Line 30.If you're employed by someone else, you claim it on Schedule A, Line 21.The other option, which Maye Ralston described, is referred to as the "standard option" and requires you to fill out Form 8829.  It can include calculations of allocated expenses and depreciation and carry-overs of unused deductions.  You need to keep documentation like mortgage and utility statements and expense records to support the calculations, but it may yield a larger deduction. To qualify under either method, the space must be used regularly and exclusively as your principal place of business.  It can't double, say, as your dining room or guest bedroom.  The official word from the IRS:Simplified Option for Home Office Deduction - Comparison chart showing the simplified and standard methodsPublication 587, Business Use of Your Home (Including Use by Daycare Providers) - Explains the exclusive use test and many other thingsFAQs - Simplified Method for Home Office DeductionForm 8829 for the standard deduction option:  Page on irs.govSchedule A (Form 1040), Itemized DeductionsSchedule C (Form 1040), Profit or Loss From Business
I have a full-time job. If I run a startup side business, and meet the other requirements, can I claim the home office deduction on my side business?
First off read the requirements for a home office deduction directly from the horses mouth. The IRS. Home Office DeductionDo you see the forth bold heading titled regular and EXCLUSIVE use? I’m going to play Las Vegas odds maker here and give you 100,000 to 1 odds that neither room qualified for the EXCLUSIVE use test. TWO rooms EXCLUSIVELY devoted to a side business that generates $1,000 a year? Do you really think that a quick search of you browser history would not reveal some personal use of the computer? That blows the EXCLUSIVE use test.The IRS likes to audit small businesses with little or no income/losses. The last time I looked returns claiming the home office deduction had just under a 10% chance of being audited. Those without less than 1%.Consider if you really qualify and if it is worth it.
Does the United State's IRS allow you to claim business use of your home expenses on form 2106 if you don't itemize your expenses?
To claim business use of your home, you have to fill out form 8829, which separates direct and indirect expenses, and lists several different categories of expense. the details asked for on 8829 is all you will need unless you are audited, in which case you will have to back up the expenses claimed with the usual business records.I’m not entirely sure what you mean by ‘itemizing‡ expenses. If you meant to ask whether you could claim business use of the home without itemizing deductions, the answer is definitely yes. They’re entirely different forms.
I want to use the home office tax deduction, can I simply say my office is 50% since I just have a 2 bedroom?
You most likely can't enter 50% in line 3 of IRS Form 8829 (https://www.irs.gov/pub/irs-pdf/... ),  because as Mike Emeigh points out, the "regularly and exclusively" verbiage in the form makes it clear that only business use is permitted in that area. If the entire square footage of that room is a reception area for clients, that would be a different story, but for the typical home office where a multiple-use workstation is in a room with at least some non-business assets, allocating the entire square footage would be a mistake. The form itself is complicated, and given that the other allocations would require an insurance actuary, appraiser, and electrical metering device to eproperly, it is extremely prone to raise one's audit risk. You'd likely want to prepare for that possibility by drafting diagrams of the space in case an auditor reviews your deductions.In terms of home-office deductions on Schedule C, it's much easier to enter business-only assets (especially business-only software and services) and select a depreciation schedule for those deductions, so that at least some of your business expenses are deductible.
I own a coop apartment in NYC and use 50% of the apt as home office for my LLC. Can I tax deduct any part of the mortgage and maintenance payment?
You can tax deduct using form 8829:https://www.irs.gov/pub/irs-pdf/... However home office with declared area above 30% and 300 sq ft, and/or expenses above $5k deduction will more likely attract the IRS attention. In particular especially if you have significant source of other income from forms W2 , and to less degree from 1099 Misc. You can deduct proportionally  property tax, mortgage interest, insurance, maintenance, also you can add depreciation of home value often around 2.5%/yr(you will need a special excel table for that), utilities, and casualty losses, etc.50% use for home office probably will be a red flag. Allowable percentage also will depend on the code you use for the type of activity that your business is involved in.Also consider using form 4562 with section 179 for other business assets depreciation.
If I run an online business out of my home, what expenses related to my home can I use as a tax write offs?
If you have an area of you home set aside for the ‘exclusive use‡ of that portion of your home for the business; you can deduct that fractional portion as a business deduction (not that straightforward for a partnership or S-Corporation).Meaning if 100 square feet of a 1000 square foot home is designated properly for this purpose, then you can basically deduct 10% (100 / 1000 = 10%) of all the expenses (within reason) of your home.Imagine the costs you would be able to deduct if you rented a space: Rent, utilities, internet, etc.)Review IRS Form 8829 for specifics https://www.irs.gov/pub/irs-pdf/...Good luck with your business!
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