Tax Benefits of the Home Office

By
Real Estate Agent with BANCROFT REALTY LLC 0637667

Home Office Deductions Defray Some Living Expenses

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

 

If you found this article useful maybe you will enjoy

How to Deduct More Than $25,000 in Passive Losses Per Year

How to Sell Your Existing Home With A Home Office Tax Free

How to Deduct 100% Business Entertainment Meals

Make Your Next Sports Utility Vehicle Tax Deductible With Section 179

 

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.

Publisned at http://blog.jodywallrealtor.com/business/tax-benefits-home-office.html

Comments (5)

Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Haven Express @ Keller Williams Arizona Realty

Hi JODY WALL!

Thanks for a great post featuring exceptionally well presented information about the tax advantages of a home office!

We like your writing style!

We wish you great success with your blog posts and networking with other members of Active Rain!

We clicked the “Follow” button on your profile so that we will be alerted to your future blog posts and can read and comment on them, and we invite you to "follow us" - should you be interested. There is no requirement or obligation for you to do so, but we would be honored if you choose to do so!

Aug 27, 2016 03:53 AM
Jennifer Mackay
Counts Real Estate Group, Inc. - Panama City, FL
Your Bay County Florida Realtor 850.774.6582

Thanks for sharing JODY WALL - I love tax deductions and take as many as are allowed by law LOL - You get a follow for this post as well as from and welcome to AR

Aug 27, 2016 04:05 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Jody Wall,  Great number 2 blog, keep them coming.

Aug 27, 2016 04:42 AM
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

I am warry of this option.  I know a guy who has been audited 3 times in 7 years and it was the home office they looked at.  Also, there used to be a payback penalty if you sold your home.  It was about 3 years

Aug 27, 2016 09:01 AM
Jody Wall

I have written but not shared about just that type of situation.  He probably filed on Schedule C.  There is a way to ensure "home office" never shows up on the return.

Aug 27, 2016 09:27 AM
Lisa Von Domek
Lisa Von Domek Team - Dallas, TX
....Experience Isn't Expensive.... It's Priceless!

Great information in your post JODY WALL , keep up the good work.

Welcome to the Rain and Thank You for the Follow!

Aug 27, 2016 01:25 PM