Deduction Irs Tax tip 2006-53
Q.I have a business in my home I started since 2006 . I had my taxes done quickly this year and had to pay nothing. This year I will owe and I've been told by 2 accountants I can deduct part of my home which is paid off and then pay taxes on what I pay myself or just pay taxes on my income and avoid a lot of red flags. I will also have to pay the IRS if I sell this home, which I plan on doing in the next 5-7 years. I use 1/4th of the square footage in my home for my business if that helps. Anyone with any experience with a Deduction Irs Tax in 2006 and opinions would help. Thanks
A.Be certain that he portion of the house that you deduct for business is used only for business. Use it as a guest room or a den and you can not legally deduct Personally, my advice is to go see a paid tax preparer. They can answer all these questions for you. You only have to do it once, in the first year that you're self-employed, and then you will have all the questions answered and figured out, and you can do it yourself the next year. I would expect this to cost about $200 to $300 or maybe even more if you have complicated taxes (like stocks you sold or something). But they may be able to point out things you didn't know about which could save you that much money in taxes. For instance, when I went to have my taxes done, I found out that as a self-employed person, I could count my home office (separate room in a 2 bedroom apartment) as a home office, but not only that, I could also count a percentage of my utilities, such as electricity, water, and phone. I also was able to count computer equipment. I bought a $500 LCD monitor, and I used it all day for work, so that counted as an expense and reduced my income by $500. I also learned that I could take social security payments (the extra part that only self-employed people have to pay) as a deduction. I could have figured out several of these things on my own, I'm sure, but would I have figured them all out? There's a good chance I would not have known about something or that I would have not really been sure and would have decided to be on the safe side and not take a deduction. That's why getting professional advice *could* pay off, as long as you don't get lazy and take your taxes there every year. IRS TAX TIP 2006-53 If you use a portion of your home for business purposes, you may be able to take a home office deduction whether you are self-employed or an employee. Expenses that you may be able to deduct for business use of the home may include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, depreciation, painting and repairs. You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business As a place to meet or deal with your patients, clients or customers in the normal course of your trade or business Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction will be limited if your gross income from your business is less than your total business expenses. If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it. If you are self-employed, use Form 8829 to figure your home office deduction and report those deductions on line 30 of Schedule C, Form 1040. There are special rules for qualified daycare providers and for persons storing business inventory or product samples. If you are an employee, you have additional requirements to meet. The regular and exclusive business use must be for the convenience of your employer. For more information see IRS Publication 587, Business Use of Your Home, available at IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676).
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