IRS Tax Tip: Home Office Dedcution

Simplified Option for Home Office Deduction

Do you work from home? If so, you may be familiar with the home office deduction, available for taxpayers who use their home for business. Beginning this year, there is a new, simpler option to figure the business use of your home.
This simplified option does not change the rules for who may claim a home office deduction. It merely simplifies the calculation and recordkeeping requirements. The new option can save you a lot of time and will require less paperwork and recordkeeping. 
Here are six facts the IRS wants you to know about the new, simplified method to claim the home office deduction.
1. You may use the simplified method when you file your 2013 tax return next year. If you use this method to claim the home office deduction, you will not need to calculate your deduction based on actual expenses. You may instead multiply the square footage of your home office by a prescribed rate.
2. The rate is $5 per square foot of the part of your home used for business. The maximum footage allowed is 300 square feet. This means the most you can deduct using the new method is $1,500 per year.
3. You may choose either the simplified method or the actual expense method for any tax year. Once you use a method for a specific tax year, you cannot later change to the other method for that same year.
4. If you use the simplified method and you own your home, you cannot depreciate your home office. You can still deduct other qualified home expenses, such as mortgage interest and real estate taxes. You will not need to allocate these expenses between personal and business use. This allocation is required if you use the actual expense method. You’ll claim these deductions on Schedule A, Itemized Deductions.
5. You can still fully deduct business expenses that are unrelated to the home if you use the simplified method. These may include costs such as advertising, supplies and wages paid to employees.
6. If you use more than one home with a qualified home office in the same year, you can use the simplified method for only one in that year. However, you may use the simplified method for one and actual expenses for any others in that year.

Visit IRS.gov for more about this easier way to deduct your home office.
http://content.govdelivery.com/accounts/USIRS/bulletins/84fc7d#.UfgJo4XzJaU.email

Letting Go.

I recently had the opportunity to meet with a business owner who has been at the helm of a growing and profitable business for almost three years.  I could tell by talking with him that he was very proud of what he had accomplished in that time....and why shouldn't he be?  His business doubled from 2011 to 2012 and he is considering opening a second location.

In speaking with this gentleman, it became clear that like the rest of us he started out wearing all the hats.  As he grew, he hired someone to first answer the telephones....then someone to work at the front desk...and finally other professionals who could do what he was doing.  His final relinquishment...the tax returns.  What I saw was a business owner who prepares his own tax returns. Why, you might ask?  He has an accounting degree along with a past career in a very complex area of finance.  This man had actually "made it" more than once, which is such a fantastic accomplishment.  He feels as though he is qualified to do them.

The roadblocks he is facing are the same ones we all face at some point in our entrepreneurial journeys.  What do I have to let go of so I can grow?  Even though I "can" do this task, is it the best and highest use of my time?  Am I ready to let someone else who is an expert at this task step in and free up my time to be an entrepreneur again?

Letting go is very difficult to do, but not letting go also has it's down side.

I know this business owner will be successful whether or not he works with my firm.  I just hate to see business owners feeling stuck and overwhelmed when I know I can help them.