How to Take the Home Office Deduction

Nowadays, your office can be wherever your laptop is, but you may be unaware that having a home office can lead to tax savings. Let's explore how you can legitimately and legally claim the home office deduction without any disputes from the IRS.

One of the requirements for claiming a home office deduction is that the space must be used exclusively for business purposes. This means it cannot be your couch, bed, or kitchen island. The IRS is very strict about this!

Once you've determined you have a qualifying space, there are two major approaches to deducting a home office if you're a qualifying sole proprietor or owner of a single member LLC: using the simplified method or the actual cost method (spoiler alert, the actual cost method has the potential to save you more). Even if you're an employee of your S Corp or C Corp, you can take a home office deduction, the benefits are actually even greater this way!

"The office is wherever your laptop is nowadays, even your iPad or your iPhone. What I want to talk about with you today is how you can get an advantage, tax-wise, for having a home office and how to do it in the most legit way that cannot be argued by the IRS."

In this episode, you will learn the following:

1. How to get an advantage, tax wise, for having a home office and how to do it legally and within the rules.
2. The criteria for a home office to be eligible for a tax deduction and what evidence you need.
3. What an accountable plan is and how it can provide a tax-free transfer of money for home office expenses.

What you'll hear in this episode:

• What does it mean to have a home office that serves another purpose?
• How do you calculate the home office deduction?
• Simplified vs. Actual Cost Method
• What do you do when you’re an employee of your business?

Here are some brief snippets from this episode:

[00:00:50]
Your home office needs to be exclusively used for business. You cannot have it serve another purpose. The way you deduct your home office will vary based on the type of business you have. How to do it in the most legit way that cannot be argued by the IRS.

[00:08:16]
If you're self-employed, you do the home office deduction. If you're an employee of your business, this opens up a whole new method. Ideally, you would use what's called an accountable plan. That means you'll be able to reimburse your home office use every single month.

Related episodes:

Tax Tips for Short Term Rental Owners with Ryan Bakke

Why Your Tax Pro Says No to Creative Strategies

Five Key Financial Building Blocks for Your Business

Resources:

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The information contained in this podcast is intended for educational purposes only and is not individual tax advice. Please consult a qualified professional before implementing anything you learn.