Rent deductions

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wickedDUDE

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Jun 25, 2006
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I've been living on my own for the last 7 months in an apartment and want to deduct part of it because it's needed for the operation of my business. It's a 1 bedroom and I would say about 30% is used for the business. Can this be deducted in the tax return and where would this go? Under home office expenses I only see things like heat, electricity, insurance, but not Rent.

Thanks
 


wickedDUDE said:
I've been living on my own for the last 7 months in an apartment and want to deduct part of it because it's needed for the operation of my business. It's a 1 bedroom and I would say about 30% is used for the business. Can this be deducted in the tax return and where would this go? Under home office expenses I only see things like heat, electricity, insurance, but not Rent.

Thanks
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Yes, it can be deducted. Figure out the square footage of the entire apartment, then get the square footage for your office. Whatever percentage your office is, that's what you can deduct.

So for example, if your rent is $1200, your apartment is 1600 square feet, and your office is 400 square feet, you can deduct $300/month for your office space.
 
dont know if true, but heard from multiple CPA's and 2 lawyers that home deductions help throw red flags.. just saying
 
You are only allowed to deduct for a home office (assuming you are in the US) if that space is ONLY used for business. If you use that area for any other purpose it is not allowed. That means if you use your desk to sit at and pay your personal bills, check your personal email etc it is not allowed. Of all the deductions you can try and take this one raises flags the quickest because so few people are really eligible to claim it so the irs knows going in that the odds are in their favor.

Before claiming a home office deduction make sure all your ducks are lined up in a row as increases your chance of an audit by about 15x.

If you are doing your own taxes I would not go there. I would only do it if you had a cpa or tax attorney say they thought you qualified and that your records were ready for the extra eyeballs the irs was going to send your way.

You really do not want to go through an audit. I went through one a few years back and it sucked the life out of me for over a month. They crawl up your ass and park there for awhile. Seriously not any fun.

Richard
 
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ARVolund said:
You are only allowed to deduct for a home office (assuming you are in the US) if that space is ONLY used for business. If you use that area for any other purpose it is not allowed. That means if you use your desk to sit at and pay your personal bills, check your personal email etc it is not allowed.
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How could they possibly prove that i'm using that to check personal email and do my personal bills at the desk... I wrote it off as a ratio of square footage of the "office" to total square footage.
 
more misinformation surrounds this topic as well as 'writing off' a car (which is also technically proportional to use).

talk to a cpa.

I have a dedicated office, 10x15' that's freestanding in my back yard. Yes I write it off.

However yes it's "legit" (I'm not trying to write off a "portion" of my studio, which also includes my couch, etc)
 
Sonny Forelli said:
more misinformation surrounds this topic as well as 'writing off' a car (which is also technically proportional to use).

talk to a cpa.

I have a dedicated office, 10x15' that's freestanding in my back yard. Yes I write it off.

However yes it's "legit" (I'm not trying to write off a "portion" of my studio, which also includes my couch, etc)
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Did you just like...build an office in your back yard? Pictures?
 
There's a specific form for the home office deduction, 8829 and then you put the total from that form on line 30 of a schedule C. It's only valid if you're self employed, which, obviously you are. I know this because my Uncle is a CPA in California and I used to help do people's taxes for him when I was like 15. I threw that last sentence in there to put some weight on the next couple. Get a CPA. I could do my taxes no problem but guess what, a good CPA is worth his weight in gold. Mine just saved me almost 10k for $500.
 
I've never had a problem writing off my home office, but like Sonny, I'm totally legit (except mine is just a room in my house, not a free-standing structure).

But this...

ARVolund said:
You really do not want to go through an audit. I went through one a few years back and it sucked the life out of me for over a month. They crawl up your ass and park there for awhile. Seriously not any fun.
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...is very true. For some reason, I got flagged for an audit in 04. Let's just say it was not fun. After all was said and done, I came out clean but its very much a "guilty until proven innocent."

If you ever do get pegged for an audit, one tip I got during my whole ordeal was to try to schedule the "sit down" portion of it for as late in the afternoon on a Friday as possible. I wasn't able to accomplish this, but it seems like it would help speed things up a little as - I'm assuming, anyway - auditors are people too and want to get through it quickly on a Friday. But again, that's assuming that they really are people.
 
^ This. Plus take all your reciepts out of your file folders and throw them in a big pile or a box and say, "it's all here, have at it.".

I got that tip from an a former enron bean counter, but I'm using it if I ever get audited.
 
eVandals said:
How could they possibly prove that i'm using that to check personal email and do my personal bills at the desk... I wrote it off as a ratio of square footage of the "office" to total square footage.
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The problem is the irs asks the question the other way. You have to convince them that you use that space for nothing else. They go into the audit assuming you use the space for other stuff and you have to change their mind. You have a separate building or even a separate room with a door to the outside, not a problem. You try to deduct a corner of a room you are using for something else, like your living or tv room going to be next to impossible.
 
Grindstone said:
^ This. Plus take all your reciepts out of your file folders and throw them in a big pile or a box and say, "it's all here, have at it.".

I got that tip from an a former enron bean counter, but I'm using it if I ever get audited.
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Seriously dude how did that work out for enron? Not very good if I recall.

All that will happen is all the deductions you cannot document will get removed and you will pay more taxes. The agent will ask for a specific receipt and if you cannot hand it to him he removes the deduction. He then goes to the next one and does the same thing. No documentation no deduction and saying it is somewhere in that pile find it to the auditor will not work because the less documents he finds (if he even bothers to look at all) means you owe the irs more money which is the purpose of the audit in the first place.
 
wickedDUDE said:
I've been living on my own for the last 7 months in an apartment and want to deduct part of it because it's needed for the operation of my business. It's a 1 bedroom and I would say about 30% is used for the business. Can this be deducted in the tax return and where would this go? Under home office expenses I only see things like heat, electricity, insurance, but not Rent.

Thanks
Click to expand...

Business use needs to be regular and exclusive. Preferably you want a room with a door to dedicate to your home office. It will be hard to justify a home office in a space that isn't it's own room.

I doubt you will be able to meet the exclusive use with a one bedroom apartment unless it has a study or den.

The IRS prefers that you use square footage to determine the percent of business usage but you can use other "reasonable" methods like number of rooms as well. So if there are 4 rooms in your apartment and you use one regularly and exclusively for business you can deduct 25% of rent and utilities.

As far as filling out the forms goes I have always used to turbotax to prepare my returns, and it is worth the $100 for the small business version. As others have mentioned you may need the help of a CPA.
 
ARVolund said:
You are only allowed to deduct for a home office (assuming you are in the US) if that space is ONLY used for business. If you use that area for any other purpose it is not allowed. That means if you use your desk to sit at and pay your personal bills, check your personal email etc it is not allowed. Of all the deductions you can try and take this one raises flags the quickest because so few people are really eligible to claim it so the irs knows going in that the odds are in their favor.

Before claiming a home office deduction make sure all your ducks are lined up in a row as increases your chance of an audit by about 15x.

If you are doing your own taxes I would not go there. I would only do it if you had a cpa or tax attorney say they thought you qualified and that your records were ready for the extra eyeballs the irs was going to send your way.

You really do not want to go through an audit. I went through one a few years back and it sucked the life out of me for over a month. They crawl up your ass and park there for awhile. Seriously not any fun.

Richard
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The term audit gets thrown around a lot. I am assuming you had a "face to face audit" which is the more rare of the two types. Normally, an audit is simply mail coorespondence where you have to supply whatever info they think they need.

As for a face to face audit, you don't have to meet face to face if you have audit defense representation.

So I assume you either decided to handle it yourself face to face or by "crawl up your ass" I assume you just mean it was a pain getting all the documentation to back up your tax claim?
 
I make my monies on the toilet via wifi and macbook. Can I make a deduction everytime I log in to my networks to check my monies while Im droppin a fat deucey?

Hurr Durr
 
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