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Are you missing out on one of the most overlooked tax deductions available to small business owners?
In this episode, Mike Jesowshek discusses the often misunderstood home office tax deduction, breaking down its requirements and benefits for small business owners. He covers the main qualifications, including exclusive business use and regular use, as well as the administrative office rule that opens the door for many professionals to take advantage of this deduction. Mike also compares the simplified and actual methods of calculating the deduction and offers practical advice on maintaining proper documentation to ensure compliance and maximize savings.
Learn how the home office deduction can reduce your tax bill and boost your savings by tuning in!
[00:00 - 05:25] Introduction to Home Office Deduction
- Mike explains the common misconceptions about the home office deduction.
- He stresses that the IRS encourages this deduction as long as it's used correctly.
- The home office must be used exclusively for business and on a regular basis.
- Mike explains that areas like the dining room don't qualify, but dedicated spaces do.
- He introduces the administrative office rule, allowing home offices to qualify even if work is done elsewhere.
[05:25 - 11:03] Calculating and How to Claim the Home Office Deduction
- Simplified method: $5 per square foot, up to 300 sq. ft.
- Actual method: Business use percentage multiplied by total home expenses.
- Mike walks through an example of calculating the deduction using both methods.
- He highlights when the actual method may provide larger savings.
- Mike explains how sole proprietors and S corporations claim the deduction using different forms.
[11:03 - 18:08] Importance of Documentation
- Emphasizes the need for thorough documentation, such as taking pictures and keeping cost records, to protect against audits.
- Mike encourages business owners to take advantage of this deduction before year-end.
Direct Quotes:
"The home office deduction is black and white in the tax code. The IRS wants you to take advantage of it." - Mike Jesowshek, CPA
"Every deduction is worth it. This takes very little time as long as you have the tools to help make it happen." - Mike Jesowshek, CPA
"The key to successfully using the home office deduction is proper documentation and following the rules." - Mike Jesowshek, CPA
Check out this episode’s blog post: How Does the Home Office Deduction Work?
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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast
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