I transitioned to working in my home office exclusively a few years ago for my employer. I am looking at transitioning to being a self employed contractor (1099 for another business) next year (and getting out from under the thumb of these corporate stooges!) so I'm looking at the whole self employed business person thing along with all the things I should do. I noticed during the research process that I could have/should have been writing off my "home office" that is exclusively used (because after 8-10 hours I AM OUTTA THERE!) as an employee - in addition to doing that as a self employed person/business in the future. Seeing as it's getting towards the end of the year, I'm curious... Should I do this for my 2016 taxes?
I've read a good number of websites and the IRS's descriptions and I'm getting the feeling if indeed it truly is a 100% usage portion of the home I should be claiming it. We bought the house in 2011 and pay approx 24k per year for the mortgage plus the various other things. The office is only 10x10 or so - 100sqft and the house is approx 2000sqft. Right now we might be $200k in the positive if we were to sell today, so the market will really have to surge if we are to bust out beyond the 500k married limit.
Like I said, so far it seems like I should be doing this, just curious if anybody can help me see a reason that it's a negative thing and it shouldn't be something that I should do because I'd get screwed over in the future.
I just left the corporate world to work for a very small consulting firm, which doesn't have an office everyone reports to and so we all work from our respective homes. I just built a 10x12 office in the basement for this. I'm going to be jumping on the wagon for this thread. Great idea, OP. Thanks.
Claiming a portion of the house as a business deduction means that the same portion of any profit will be taxed as capital gains. Between that and the increased audit risk, many people forego the deduction.
The new simplified option of $5/sqft is pretty good for many folks and simplifies the depreciation/recapture paperwork down the road. Regular option worthwhile if office is large (over 300sqft), expensive for whatever reason, or something beyond a room with a desk/computer/phone.
For the first year I'd recommend paying a tax preparer (and saving receipts), then just doing on your own with TurboTax Home & Business going forward.
supersnoop00 said: Claiming a portion of the house as a business deduction means that the same portion of any profit will be taxed as capital gains. Between that and the increased audit risk, many people forego the deduction.
Under the regular method, correct. Under the simplified option (available since 2013), there is no depreciation deduction or recapture at time of sale.
Not to mention, I don't think home office deductions are really that much of an audit trigger anymore. The world is moving towards a more mobile work force, which means sales guys sometimes don't even have a desk at their company's building... (example)
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