Tax considerations

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What are the tax requirements for deducting a home office?
Can I use part of my condo as a home office?
Are there any other deductions available?
What percentage of a home office may I deduct?
Are there any other home office deductions?
I'm about to sell my home office. Will the sale be taxed?
When do I deposit employer or employee income taxes?
What's a periodic deposit?
What are the tax requirements for deducting a home office?

To deduct the expenses associated with a home office, you must regularly use the office space as your principal place of business. You must also be able to show that you use this space to do business, meet or coordinate customers and/or you have a separate location used exclusively for business.

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Can I use part of my condo as a home office?

Yes. IRS regulations allows an individual to use his home as an office. This can be done even if the home is a condo, house, apartment, town-home, mobile home or boat. All of these sites are subject to the same IRS rules as an ordinary home office.

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If I'm unable to deduct my office expenses, are there any other deductions available?

Yes, you can usually deduct or depreciate most items used in the day-to-day operation of your advocacy service. This includes, but is not limited to: rents, computers, office equipment, office supplies, phones, business cards, stationery, professional memberships and more. Contact your accountant or CPA for details.

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What percentage of a home office may I deduct?

The home office is usually a percentage of your total property. Whatever the percentage of your home is used exclusively for business is the same percentage you should deduct. Formula: Divide the number of square feet used for business by the total number of square feet in the home. Example: Our student advocate has a 2 bedroom home. One bedroom is used exclusively for her advocacy service and makes up about 30% of the total property. In this instance, all other rules being equal, she would be able to deduct approximately 30% as her home office. The advocate may also be able to deduct 30% of combined household expenses such as utilities.

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Are there any other home office deductions?

If you meet IRS requirements for a home office, you may be able to deduct part of your utilities, insurance, electricity, gas and repairs or alternations to the home for the sake of the business. See IRS Publication 587 for details.

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I'm about to sell my home office. Will the sale be taxed?

Not anymore! The rules for selling a home used as a home office have changed. If you lived in your home for at least two of the last five years, the profit you make up to $250,000 for a single person and $500,000 for a married couple is not taxed. You may have to pay a capital gains tax on any depreciation deducted after May 1997. See your CPA or accountant for details.

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When do I deposit employer or employee income taxes?

Periodic deposits for income taxes usually occur once per month. The payment itself is usually due by the 15th of each month. There are substantial penalties for not depositing these funds on time. The owner of the company can be held responsible for unpaid income taxes with substantial penalties for not depositing funds on time.

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What's a periodic deposit?

A periodic deposit is the act of depositing employer and employee income taxes, Social Security and Medicare taxes into an authorized institution like a bank. The IRS provides you with a coupon for depositing these funds. These coupons are called the 940 and 941 deposit slips.

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