home
***
CD-ROM
|
disk
|
FTP
|
other
***
search
/
Cream of the Crop 1
/
Cream of the Crop 1.iso
/
BUSINESS
/
SBA62.ARJ
/
FSBA.EXE
/
F301.SBE
< prev
next >
Wrap
Text File
|
1992-04-30
|
12KB
|
333 lines
@Q01
┌───────────────────────────────────────────┐
│ DEDUCTIONS FOR OFFICE-IN-THE-HOME EXPENSES│
└───────────────────────────────────────────┘
If you use part of your residence for business purposes, you
MAY be able to deduct part of your office-in-the-home expenses,
such as part of your rent (if you rent) or depreciation of your
house (if you own), as well as other occupancy expenses that
would be allowable as business expenses, were it not for the
home-office deduction limitations. However, the rules are
fairly stringent, and the general rule is that office-in-the-
home expenses are NOT deductible for tax purposes, unless you
meet a number of quite technical requirements.
NOTE that this series of questions and answers assumes that
your home-office use relates to your own business, and does
not deal with whether, as an employee, your work at home
qualifies as being for the convenience of your employer.
QUESTION: Do you use a portion of your residence
EXCLUSIVELY for business purposes AND on a
REGULAR basis?
@YN
01\Q02
02\Q05
@Q02
So far, so good. Since you use part of your residence
EXCLUSIVELY for business and on a REGULAR basis, you may
be able to claim office-in-the-home deductions if you also
qualify under one of several other alternative tests. One
of these tests is the determination of whether your home office
is your PRINCIPAL place of business for a particular business
you carry on.
QUESTION: Do you use a portion of your home as your
PRINCIPAL place of business?
@YN
01\Q09
02\Q03
@Q03
You're down, but not out. Even if your home office is not
your principal place of business, you may still qualify for
deducting home office expenses if you use your home office to
meet with customers, clients, or patients on a regular basis.
(But remember, you still must use your home office EXCLUSIVELY
and REGULARLY for business purposes.)
QUESTION: Do you use your home office regularly to meet
with customers, clients, or patients?
@YN
01\Q09
02\Q04
@Q04
Hmmmm....Not good.
But there are several other possibilities we haven't considered
yet. One important one is where your home office is a separate
structure that is not attached to your house or living quarters.
Under this test, you still must use the office exclusively and
regularly for business, but it need not be your principal
office or be used to meet clients, customers, or patients. It
simply must be used "in connection with" your business.
QUESTION: Is your home office in a separate structure,
not attached to your house or living quarters?
@YN
01\Q09
02\Q05
@Q05
You may still be able to qualify for a home office deduction
if you run a retail or wholesale business out of your home,
and use part of your home on a regular (but NOT necessarily
exclusive) basis to store INVENTORY.
QUESTION: Do you use part of your home on a regular
basis to store inventory from your retail
or wholesale business?
@YN
01\Q06
02\Q07
@Q06
This looks promising, in your case....You MAY qualify for
the home office deduction for storage of inventory, but only
if your home is the SOLE fixed location of the business.
QUESTION: Is your home the SOLE fixed location of the
business (the business for which you are using
your home to store the inventory)?
@YN
01\Q09
02\Q07
@Q07
Your chances of qualifying for home office deductions don't
appear to be very good, based on your responses so far....
However, there is one last, longshot possibility, if you
regularly use part of your home to provide certain day-care
services.
QUESTION: Do you use part of your home regularly to
provide day care services for children, persons
age 65 or older, or persons who are physically
or mentally incapable of caring for themselves?
@YN
01\Q09
02\Q08
@Q08
CONCLUSION:
Unfortunately, it doesn't look like you meet any of the tests
for claiming expanded home office deductions. Thus you can't
write off any of the rent paid for your house or apartment (or
depreciate your house, if you own it), nor can you write off
any part of various occupancy expenses, such as electricity,
gas or other utilities. However, you may deduct the cost of
business telephone calls as expenses of your business--but no
part of the charges (including taxes) paid for basic local
telephone service for the first telephone line in your resi-
dence can be deducted.
But note that, even though you don't meet any of the require-
ments for a qualified home office that we have asked you
about, these rules will NOT disallow your deductions that are
otherwise allowed for tax purposes, such as interest on your
home mortgage, real estate taxes, or casualty losses from
damage to your residence. Also, business expenses that are
not home-related, such as business supplies, cost of goods
sold, wages paid to business employees, and other such
operating expenses, are not affected by the limitations on
home office-related deductions.
Also, look on the bright side. Since no part of your resi-
dence is considered to be a qualified home office, you
shouldn't lose your right to defer all the gain on sale of
your residence if you sell your home at a gain and reinvest
within the required period in another home. Nor, if you are
55 or over, and qualify for the once-in-a-lifetime exclusion
of up to $125,000 of gain on the sale of a home, will you
lose any part of this exclusion on account of your having
used part of your house for business.
@STOP
@Q09
CONCLUSION: You've made it through the maze, and may actually
qualify to deduct some of your home office expenses.
Now that you can apparently show that a portion of your resi-
dence qualifies as a home office, you have at least gotten
over the first hurdle.
Since the business use of your home qualifies under one of
the above tests we have put to you, then you MAY be able to
deduct part of the home office expenses that are allocable to
the portion of your home that is used in your business (in
addition to home mortgage interest, property taxes and casualty
losses).
For, example, if 15% of your home qualifies as a home office
or place of business, you could, possibly, deduct up to 15% of
your occupancy costs, such as gas, electricity, insurance,
repairs, and similar expenses, as well as 15% of your rent (if
you rent) or depreciation expense on 15% of the tax basis of
your house (if you are an owner). The IRS and the Tax Court
don't agree on the deductibility of certain other types of
expenses, like lawn care.
DEDUCTIONS LIMITED TO INCOME. Note, however, that the amount
of qualifying home office expense you can actually deduct for
the year is limited to the gross income from your home business,
reduced by regular operating expenses (wages, supplies, etc.)
and an allocable portion (15% in the above example) of your
mortgage interest, property taxes and casualty loss deductions.
If you still have net business income after taking those
deductions into account, then you may deduct the allocable
portion of your home office expenses, up to the amount of such
net income.
CAUTIONARY NOTE: The downside of taking home office deductions
is a potential tax bite when you sell your home. For example,
if 15% of your home has been used for business and you sell
your home for a gain, you will have to pay tax on 15% of the
gain, even if you reinvest in a new house, or even if you qual-
ify for the once-in-a-lifetime $125,000 exclusion of gain (for
persons over age 55) when you sell the house. Thus, a few hun-
dred dollars of home office deductions claimed now may result
later in thousands of dollars of tax on the "business" part of
your house when sold for a gain a few years down the road.
@STOP
@HELP
@H\01
Hints regarding the exclusive business
use test: You should have your home
office set up in a room, or a portion
of a room (preferably with some kind of
partition) that only contains typical
business furniture, and not personal
use items such as a dresser, TV set,
bed, etc.
@H\02
Note that if your business is carried on
in one or more locations, proposed regu-
lations require you to consider the fol-
lowing factors as to principal location:
. the relative amount of business
income earned at each location;
. the business facilities available
at each location; and
. the amount of time spent on busi-
ness activities at each location.
@H\03
┌─────────┐
│ EXAMPLE │
└─────────┘
An example that would qualify for the
home office deduction would be a physi-
cian who has a regular main office down-
town, but who also has a home office,
which he or she uses EXCLUSIVELY and
REGULARLY to meet some patients, even
though it is not the principal office.
@H\04
┌─────────┐
│ EXAMPLE │
└─────────┘
A situation that might qualify for the
home office deduction would be a partner
in an accounting firm who does most of
her work in the firm's business office,
but who sets up her office in the garage
(UNATTACHED to the house) next to her
home, where she works on evenings and
weekends (provided that the home office
is used EXCLUSIVELY and REGULARLY for
business).
@H\05
Note that the storage space test is not
for people who are engaged in service
businesses, such as doctors, lawyers or
dentists. Also, space that is used for
storing things other than inventory,
such as books, files or equipment, does
not qualify.
@H\06
Note that this requirement refers to
your sole FIXED location of your busi-
ness, and that the storage use must be
regular, but not necessarily exclusive.
@H\07
If you use part of your home on a regu-
lar (but not necessarily exclusive)
basis as a day-care facility for chil-
dren, persons over 65, or persons who
are physically unable to take care of
themselves, you ought to qualify for
treating that part of your home as a
home office under a special exception
provided under the tax law.
@H\08
More on home telephone expenses (whe-
ther or not you have a qualified home
office): Note that if you choose more
expensive touch-tone services, rather
than rotary dial service (on a first
phone line), the entire touch-tone
charge is NON-deductible. But certain
other additional expenses, such as call
waiting, call forwarding, or extra dir-
ectory listings, can be deducted if you
show they are valid business expenses.
@H\09
PLANNING TIP: Any portion of your home
office expenses that are aren't deducted
due to the income limit in this year can
be carried forward to future years until
usable (if ever). So if you have quali-
fied home office expenses that you can't
utilize because of the income limit this
year, keep a record of them, and perhaps
you will be able to deduct the carried-
over expenses next year (or thereafter),
if the business becomes more profitable.
@END