Are You Missing This Deduction?
Home Office Deduction
This week we are covering Mistake #4: Not Taking The Home Office Deduction. According to the IRS.Gov most small businesses overlook this deduction.
If you have a space in your home that is dedicated to conducting business then you may very well qualify for this deduction.
The way this deduction works is you track the costs of operating your home throughout the year. You want to track interest, insurance, utilities and maintenance. Your home office will represent a percentage of square feet of your home as a whole. You may write off the percentage of the above expenses as a home office deduction along with a percentage of depreciation.
Here is an example (with round numbers for ease of calculations).
Costs to operate: $1000
Total Square footage of home: 1000
Square footage of home office: 250 or 25% of the total square footage
Deduction: $250 + depreciation.
This allowable deduction is one available to all home based businesses that qualify. Plug your actual numbers in and see how much you could keep in your pocket!
How much of the tax code is your CPA actually using on your behalf?
If your CPA is missing this or worse advising against it do your homework. I’m in the camp of taking deductions when you can get them; you never know what the next year will hold.
Yes there are situations where this deduction is not applicable and for most it is, so be sure to understand how this will apply to you.
This mistake is one in a series of 5 Tax Mistakes Small Business Owners MUST Avoid. If you have missed the last three you can review them here:
- Mistake #1 – Not using electronic filing systems.
- Mistake #2 – Not getting updated information early enough.
- Mistake # 3 – Not trusting a professional to file your forms and doing it yourself.
If you are feeling like your accounting is not set up to give you the information you need to watch for this and other deductions like and your needs are still small enough that you don’t really need a professional on a regular basis to help you out then I encourage you to consider two things:
- Get your systems set up the right way so the likelihood of you doing it correctly yourself is higher
- Have a professional review your work before submitting it to the IRS
Give us a call now while there is still room in our calendar for a CFO Review and we will get you started on the right foot with the best systems for you and finding all the write offs that are best for you!