[JCtx]

Deleted.

[Cdnrockies]

I can't imagine giving the government even one more dime than I absolutely have to.

[darkcloud]

If you are self-employed you likely won't raise any eyebrows for something that small. I'm usually around that same amount give or take depending on the year and I've never heard anything.

My dad has claimed this way for 20+ years. He's been audited twice and both over small reasons. The first was over cell phone deductions(they got picky over having my phone being deducted my senior year of college because I wasn't a full time employee) the second was over home office(after 20 some years of claiming it they finally decided to want to look into it, nothing came of it).

If you were trying to be crazy claiming a couple grand worth of each I'd be worried. But over $750 I wouldn't sweat it.

btw, they aren't high-risk deductions if done properly and kept in check. A good tax agent should know when a number will start raising red flags and "advise" you to back them off. It's the greedy people trying to claim more than the standard percentage for home office, $5k in entertainment, multiple $k in maintenance. Which also if you claim mileage you shouldn't claim maintenance, they are deemed the same and mileage trumps maintenance. Again a good tax agent should know all this. Plus a good accredited CPA signing off on your taxes makes you near bulletproof, again as long as your aren't crazy and greedy trying to stretch your dollar too far.

[double_j]

Self-employed - absolutely. Just make sure that you document your calculations and assumptions as much as possible.

Employed but with no dedicated office space at your employer (e.g., sales rep) - yes.

Employed with dedicated office space at your employer - probably not worth it. You'd have to justify that your job requires that you have a dedicated home office, etc.

Although if this is the only questionable deduction, it's not the worst thing in the world to claim it and wait for a dispute two or three years from now. Assuming a tax rate of 30%, you're looking at a $250 charge plus penalities. If they do chase you for it, you'll probably have to cough up about $350 or so. Not the biggest deal in the world.

[Seminole]

Originally Posted by double_j

Self-employed - absolutely. Just make sure that you document your calculations and assumptions as much as possible.

Employed but with no dedicated office space at your employer (e.g., sales rep) - yes.

Employed with dedicated office space at your employer - probably not worth it. You'd have to justify that your job requires that you have a dedicated home office, etc.

Although if this is the only questionable deduction, it's not the worst thing in the world to claim it and wait for a dispute two or three years from now. Assuming a tax rate of 30%, you're looking at a $250 charge plus penalities. If they do chase you for it, you'll probably have to cough up about $350 or so. Not the biggest deal in the world.

What he said. If you can legitimately take it just make sure you have every bit of support for it...

[Maestro]

Do not do house depreciation, or major asset depreciation, that is a pain especially if you sell the house later while still operating the business. You have to resolve what you depreciated over what you finally sold the property for not fun and not worth paying the possible tax later.

You can write of the property taxes and other costs to maintain the office in your home. The only issue is you can not double dip on the property tax. You write off your property tax under your normal home owners tax deduction however, you can not write off a portion of the tax as a business expense. It is one or the other. This is where people get screwed up, they try deducting twice.

Most tax software will walk you through all these deductions and ask questions about those expenses but it assumes you know you can not double dip. I ran into this issue with Tubotax a while back, it let me deduct it twice.

When we ran a business out of our home, we wrote off a portion of utilities and such and equipment we bought for the office and any associated expenses. We only did a mileage deduction since we could not document the car was for business only.

The important part, keep good record of this that is what counts.

[Tondtar]

I have heard from both of my accountants in the past that deductions from home office expenses puts you at a greater risk of audits.
Of course, if you have no hesitation about going through an audit and have all necessary documentations to justify it and think you have a 100% iron clad case, why not.

[Maestro]

Originally Posted by Tondtar

I have heard from both of my accountants in the past that deductions from home office expenses puts you at a greater risk of audits.
Of course, if you have no hesitation about going through an audit and have all necessary documentations to justify it and think you have a 100% iron clad case, why not.

I have heard this to be true as well, Everyone I know who ran a business from their home was at least audited once, in my case we did not run it long enough and our income was not that great so we flew under the radar.

Everyone I know who ran a business from a home made sure they had good documentation and the office only contain business items, no personal. What I mean by this is you can not have house hold bill and stuff in the file draws or anything that looks like it is not business related. If you get audited they may want to see the office and if they find anything which is not directly related to the business the IRS will use this as reason as to why you can not write it off.

[Maestro]

Originally Posted by elp_jc

Thanks a lot to all for your help .


THAT is my major concern, as well as having to file that damn 4562 form, and the local appraisal district getting his hands on it, and make me pay additional property taxes on everything, like they want you to 'voluntarily' do. Oh, and I didn't mention my house is paid for, so no mortgage, and no itemizing.

Hey Maestro, do you know if you can do the home office deduction WITHOUT doing the depreciation? That's the only way I'd do it, if at all. Seems to me you can't, since it's part of the form, no? And again, what worries me is to fill form 4562, which doesn't say anything specific on the form 8829 itself, so you can always play dumb . And yes, I'm self employed and on this business have no other office, so it'd be fully justified. Thanks again to all. Have a great day.

Honestly, I am not sure, I stayed away from the depreciation deduction on the advise of an tax accountant. His reason was simple at the time, he said if the office is 10% of the house and the house is worth $500K then you can only depreciate $50K, now you have to decide how many years you will depreciate it over, you can do long or rapid. This is what you get to write off. Now some years go past and you sell the property, and if you sell it for $600 and you wrote off $20K and say on the sale you made $200K, now you have do decide what % of the $200K was the depreciate asset and possible pay taxes on portion of the $200K, how much, not clear answer. Since there is no clear answer this opens yourself to an audit you may not win.

It is not like buying something for $10K, depreciate it down to $5K then you turn around and sell it for say $6K then you owe taxes on $1k or if you sell it for $4K then you get to write off another $1K in lost value.

The other issue comes into play is if you shut down the business and you have the depreciated asset, how do you handle it. Honestly, I am not sure if the government would even bother, however, I am personally not interested in the government poking around my business. So my instruction to the accountant is I do not want an audit.

Therefore, his advice was to only write off things which you can clearly separated from personal verse business, either physically or with proper documentation.

[Maestro]

Not to confuse you on this, I was just finalizing my taxes in Tubotax and I was going through the home office deductions, since my wife works form home and Turbotax will allow you to depreciate the portion of the home office and I just read their notes on the subject and their advise is you do not have to take it, but in the IRS eyes' your home depreciate anyway whether you take the deduction or not, so why not take the deduction.

They also warned what I said above about having to pay the taxes if you sell. Their felling is the deduction now is better then tax you pay later.

Just another view on the subject.

In our case doing the home office deduction with depreciate does not move us over the 2% AGI threshold you have to meet it get the deduction.