Posted by John K Haslach, CPA, MST on March 27, 2004 at 12:24:59:
The only time I see it is if there is foreign ownership.
John K Haslach, CPA, MST
Tax question on ‘HOME OFFICE DECUCTION’ - Posted by irene
Posted by irene on March 25, 2004 at 20:23:15:
We hold our properties in several partnerships. This year we formed a corporation (as General Partner of the partnerships) and are doing our taxes for the first time. We would like to know if we can take a home office deduction for our corporation. We live in a small town and we have consulted two CPA’s at $85.00 per hour and we got conflicting answers to some of our questions. Now we are really confused and paid good money to get that way. We will probably pay one of them to do our return. But which one. I would like to see which one is right on this question.
Re: Tax question on ‘HOME OFFICE DECUCTION’ - Posted by Diane (TX)
Posted by Diane (TX) on March 26, 2004 at 19:14:49:
If you have a space that you use only for corporate or partnership business, you can deduct.
Re: Tax question on ‘HOME OFFICE DECUCTION’ - Posted by Lyal
Posted by Lyal on March 26, 2004 at 07:32:09:
Irene,
If you don’t want to deal with the problems Wayne talks about Bronchick has in the past suggested you lease the space to your business.
Lots of other considerations before doing that…do you take a reasonable salary from the business (IRS wants you to do that before you get money out any other way) etc but it’s one approach.
Lyal
Re: Tax question on ‘HOME OFFICE DECUCTION’ - Posted by JOHN K HASLACH, CPA MST
Posted by JOHN K HASLACH, CPA MST on March 26, 2004 at 07:29:33:
Irene
You take the square footage of your office compared to the sq ft of your home, let’s say 100 sq ft v 1000 sq ft = 10%. You can then take 10% percent of your utilities as a home office expense. This does not have to be recaptured.
You must also take depreciation. Say your home cost $100,000 and 20% is allocated to land. You do not depreciate land, so you depreciate the home office at $80,000 X 10% = $8,000. You depreciated this over 39 years, so the annual deduction is $205.
When you sell your home, you must recapture the depreciation at 25%. It should not be at all difficult to track if you use computer software to track and maintain your depreciation.
Hope this helps, let me know if you have additional questions.
By the way, I hope you are operating as an S Corp, not a C Corp. Also, rental real estate should almost never be owned in a corporation.
Thanks
John K Haslach, CPA, MST
Re: Tax question on ‘HOME OFFICE DECUCTION’ - Posted by wayne
Posted by wayne on March 26, 2004 at 02:49:15:
Yes you can take a home office deduction on your federal taxes.
Steps are simple, you simply take the footage of the part of the home that the business occcupies, get that as a percentage of the total space in the home, and then use that as a proportion of the expenses in the home.
Sounds simple right,
Heres the catch, When you sell your home you get the wonderful priviledge of going back the years you claimed a home deduction and you now have to claim that on your taxes as an asset. There is not free lunch on this.
Here is my advice, and I wont even charge you 85 bucks an hour…The mathematical headaches you have going back and figuring out exactly how much you have to report when you sell your home vs. the tax writeoff you get now is not worth it.
Best to just let it go and just be glad you can work at home.
Another home office deduction question - Posted by B.L.Renfrow
Posted by B.L.Renfrow on March 27, 2004 at 12:52:58:
Someone asked me this the other day, and while I think I know the answer, I’m not sure.
If an investor rents his primary residence, either a house or apartment, can he still take the home office deduction if he meets the other criteria?
Obviously depreciation wouldn’t apply, but I believe you can deduct the proportional amount of rent based on the square footage as above, in addition to the same proportion of utilities, etc.
Correct, or am I all wet?
Brian (NY)
Re: Tax question on ‘HOME OFFICE DECUCTION’ - Posted by Barry (FL)
Posted by Barry (FL) on March 26, 2004 at 19:33:07:
John, just curious as to why you would hope they are operating a S instead of a C corp.?
Thanks,
Barry (FL)
Re: Tax question on ‘HOME OFFICE DECUCTION’ - Posted by John K Haslach, CPA, MST
Posted by John K Haslach, CPA, MST on March 27, 2004 at 05:05:15:
Hi Barry
With a C Corp, there are two levels of taxation: one at the corporate level and a second at the personal level. If you own real estate in a C Corp, when sold, there may be two levels of tax.
Hope this answers your question, if not, please let me know.
Thanks
John K Haslach, CPA, MST
Re: Tax question on ‘HOME OFFICE DECUCTION’ - Posted by Barry (FL)
Posted by Barry (FL) on March 27, 2004 at 10:44:54:
I realize that the double taxation kicks in at 50K in profit. I use my C corp for short term flips, The C corp affords me other benefits that an S would not like health benefits etc. that the S wouldn’t.
I really struggled with this question before setting up the C and at times I’m still not sure if I’d be better of with the C I have or converting it to an S.
Wouldn’t it really depend on each persons personal circumstances?
Or do you believe that the blanket statement of the S being better still holds?
Thanks,
Barry (FL)
Re: Tax question on ‘HOME OFFICE DECUCTION’ - Posted by John K Haslach, CPA, MST
Posted by John K Haslach, CPA, MST on March 27, 2004 at 10:55:41:
Yes, it depends on each person’s individual circumstances. However, it it rare when a C Corp is the way to go.
John K Haslach, CPA, MST
Re: Tax question on ‘HOME OFFICE DECUCTION’ - Posted by Barry (FL)
Posted by Barry (FL) on March 27, 2004 at 12:17:40:
Thanks again John,
Just wondering what circumstances would you consider rare for a C corp to be a better option? I may have to rethink my structure.
Thanks,
Barry (FL)