In today’s show, we continue where we left off at last week with number 3 and 4 of the major tax deductions available to startup entrepreneurs, especially those operating home-based businesses. This week we discuss the qualifications for the Business Use of your home or what was commonly known as the Home Office Deduction, and how to legally deduct traveling expenses for business with one major bonus if you are a parent with children who are a minor! **As always, I am not a CPA, tax accountant, or tax attorney. This is not legal advice, please seek the proper professional or legal advice for your specific situation and finance advice.**
Details Covered in Today’s Show is Provided by Dr. Ron Mueller’s Book “Home Business Tax Savings Made Easy” (2015) **All cited information is the owner of the specific information and are derived directly from the sources listed below by way of Ron Muellers book.** The Book May Be Located HERE.
#3 Business Use of the Home (i.e. Home Office Deduction
* Regular & EXCLUSIVELY for business; i.e. never used for anything else.
* The tax code states “The taxpayer may use ANY reasonable method of determining the Business Use Percentage of his or her home.”
* This “space” has to be a visually identifiable space” as of 2013 – So, it needs to look like an office area.
**TO QUALIFY YOU NEED TO MEET 1 OF THE 3:
* Where the PRIMARY VALUE of your business is delivered, OR
* Where you regularly meet with customers, OR
* Where the primary ADMINISTRATION or MANAGEMENT of your business is conducted.
In Calculating the Business Use Percentage:
* Measure the sqft of all “finished” areas of your home. Add up all those areas. Divide that total into the square footage of the home-office and the result is your BUP.
* (based from an IRS Clarification) “If all rooms of the home are approximately the same size, and if one of those rooms is used regularly and exclusively for business purposes, the taxpayer may use the percentage of the number of rooms used, to calculate the BUP.” (Example R. Mueller gives, if you have 5 rooms in your home, and one is used as a home-office, you can claim 20% as your BUP without doing any measurements.) (i.e. not the closets bathrooms and hallways)
**Derived from: https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction
#4 Business Trips **Primary Purpose of the travel is Business
3 IMPORTANT RULES TO QUALIFY THIS
#1 The travel must be usual and customary within your type of business. (i.e. does it make sense? Are you at a conference about modeling agencies, but you’re in the real estate business?)
#2 The travel must be conducted with the intent to obtain a direct business benefit. (The potential of ANYONE being your client or customer or prospect is a no-no!)
#3 The travel must be appropriate and helpful to developing and maintaining your business (also let’s add in after the event, did you take the advice and use it part – put the training to work)
***AND YOU MUST ALSO MEET THE 51/49% TRANSPORTATION RULE****
This rule states “For travel within the U.S., when you combine business travel with personal travel, the tax code allows you to deduct 100% of your transportation costs, in addition to lodging and meal deductions.”
#1 If the PRIMARY purpose of your trip is BUSINESS AND;
#2 If more than ½ of your days away qualify as “Business Days”. [IRC Section § 1.162-2(b)(2)] (More details HERE)
**To define “Business Day” generally includes (a) travel days getting to and from your business destination,
