Any additional expenses for small business

[henryz]

Hello everyone, I was wondering if there are other deductables for home businesses, I added all my expenses and deductables but still show about 50% left I guess what it would be profit that I would be taxed on, I know you guys mentioned before about also including part of my mortgage as an expense since I run it out of my home. Is there anything else I can deduct like all the time I put into it. Any advice will be appreciated.

Thanks

[Freelancier]

If you made repairs that affected the space where you work, it might be deductible. Think "roof replacement" or anything where if you were doing it to your office building it would be an expense. Check with your accountant.

Internet, phone, insurance, mortgage principal (interest is deducted elsewhere), electric, gas, water/sewer, exterminator, garbage. Divide by the square footage dedicated to your work area or use the "number of rooms" method if you're dedicating one or more rooms to your business offices. You can't take it all, only the portion related to your business (although with internet and all but one phone line, you should take all).

Again, chat with your accountant. They will know more about your situation than we will.

[nealrm]

FYI - The home office expense is one of the most abused and most audited deductions. If you are using that deductible, the space you state MUST be used 100% ONLY for the business. That means if you are using your bedroom as an office or working from the kitchen table, it doesn't count. Technically if you are using your work desk to also pay personal bills, you can deduct the area. So use that deduction with care.

[billbenson]

FYI - The home office expense is one of the most abused and most audited deductions. If you are using that deductible, the space you state MUST be used 100% ONLY for the business. That means if you are using your bedroom as an office or working from the kitchen table, it doesn't count. Technically if you are using your work desk to also pay personal bills, you can deduct the area. So use that deduction with care.

I underestimate this one so it won't be a flag to the IRS

[nealrm]

correction to my post:

Technically if you are using your work desk to also pay personal bills, you can deduct the area.
should read
Technically if you are using your work desk to also pay personal bills, you can't deduct the area.

[henryz]

I figured that's what you meant, I do use a dedicated room to my business. I will check with my accountant and see what I decide to do.

Thank you

[Evan]

http://www.irs.gov/pub/irs-pdf/f8829.pdf <-- essentially anything on this form. If you rent, it'd be a percentage of your rent, otherwise it's your mortgage INTEREST (not principal -- which is not deductible) and real estate taxes that you could deduct, up to the allocated percentage, with the balance going on Schedule A.

Very IMPORTANT though is if you OWN a home, you are supposed to be depreciating the home (27-1/2 years) and including anything that adds to the cost basis, and taking the appropriate percentage. If you claim this deduction and EXCLUDE depreciation, the depreciation expense you SHOULD have taken will later be recaptured when you sell it. So on a $100K home, with 10% home office means $10K is the "home office" which is depreciated over 27-1/2 years. If you live there for 30 years and don't claim any deduction for it, if you sell the home 35 years later for $350K, your gain isn't on $350 less $100.... ($250K, for which there is an exclusion)-- but it's on $90K, so you'd be paying capital gains tax on that $10K. Not significant, but that's $2K in additional taxes, on top of losing $2500 in tax savings potentially -- assuming a 25% tax rate -- so a total loss of $4500. This tends to be one area most practitioners don't get right.