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Old 02-22-2013, 08:21 PM
 
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Basic background- I'm salary remote employee W2, she's self employed 1099 mostly.

We both rented office space to work out of prior to buying a SFH. Now we work out of our primary residence.

Buying an SFH was a personal decision, so we didn't really look at the business tax consequences ahead of time.

Should we try to deduct business use of the house or treat it as a residence only?
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Old 02-22-2013, 09:39 PM
 
Location: Indianapolis
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If you use a room exclusively for work, you may be able to deduct some of the costs relative to the square footage of the space. See the following: Home Office Deduction & Work From Home? Consider the Home Office Deduction
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Old 02-22-2013, 11:05 PM
 
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It can get complicated real fast. A local CPA might be the person to ask. Consider that the office part of your home might not qualify in any homestead tax exemption. Your homeowner insurance might not cover if you have clients or vendors. In a lot of cases, it can be better to skip the exemption.
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Old 02-24-2013, 07:51 AM
 
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Harry's right. But working out of your house means a host of legitimate deductions that would ordinarily not be a writeoff on your personal returns. Things such as your internet connection, your telephone, your car, etc. All these are legitimate deductions because your business would need them to function and can save you thousands on your taxes every year.

That being said your wife, being an independent contraction, should think about incorporating in order to make those deductions more legit.
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Old 02-24-2013, 09:00 AM
 
Location: East of Seattle since 1992, originally from SF Bay Area
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I did this for several years and it did help save on the taxes. The red flag for the IRS is when you take the deduction but show little or no income from the business, as long as you really are working it's not an audit trigger. I did also have separate business insurance, to cover equipment and also liability. That is deductible on the schedule C.
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Old 02-24-2013, 10:31 AM
 
19,335 posts, read 58,666,950 times
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Quote:
Originally Posted by cpg35223 View Post
Harry's right. But working out of your house means a host of legitimate deductions that would ordinarily not be a writeoff on your personal returns. Things such as your internet connection, your telephone, your car, etc. All these are legitimate deductions because your business would need them to function and can save you thousands on your taxes every year.

That being said your wife, being an independent contraction, should think about incorporating in order to make those deductions more legit.
Hey, CPG. Just pullin your leg here... how does a wife become an independent contraction? Is that like a massive cramp? Or does she abbreviate her name? Maybe it has to do with those wanton southern hussies? (Still love your responses on that thread)

The advantages of an LLC or corporation are significant enough that I'd suggest them to anyone serious about their own business.
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Old 02-24-2013, 03:08 PM
 
Location: Georgia, USA
28,838 posts, read 31,945,543 times
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Default The EZ home office deduction

New starting 2013:

Claiming A Home Office Deduction? It's Much Easier This Year, Here's How - Forbes
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Old 02-24-2013, 05:09 PM
 
Location: North Idaho
25,565 posts, read 33,609,885 times
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Here's the problem with it. It draws the IRS in for a closer look, because the home office deduction is very often abused. It rings their alarm bells and will get you on their list for a close scrutiny.

So, if you are going to do it, do it 100% by the book. The office space can not be used for anything personal at all. No playing games on the computer, no storage of your novels. I wouldn't even check my personal email.

Since you can deduct all of your other business expenses, without deducting office rent, I suggest that you run the figures both ways and decide if deducting the office space is worth drawing the fishy eye of the IRS.

So far, at least, you can still deduct the interest on the house, and that might be enough. Our vacationer-in-chief is trying to remove that deduction, so don't count on it lasting forever. But in the meantime........
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Old 02-27-2013, 11:01 AM
 
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Quote:
Originally Posted by harry chickpea View Post
Hey, CPG. Just pullin your leg here... how does a wife become an independent contraction? Is that like a massive cramp? Or does she abbreviate her name? Maybe it has to do with those wanton southern hussies? (Still love your responses on that thread)

The advantages of an LLC or corporation are significant enough that I'd suggest them to anyone serious about their own business.
Hah. Whoops.
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Old 02-27-2013, 11:08 AM
 
568 posts, read 865,798 times
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I was audited for this deduction...and I will never do it again...even though I was correct...it was such a HASSLE and waste of my time off work....
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