Here at the Tax Planning Pros we are always passionate about helping as many small businesses as possible increase net revenue through Tax Planning.

It is my hope that with tax tips like these you will begin to see how important it is to put the right Tax Plans in place in order to effectively reduce your tax burden and increase your net revenue.

So, today we’ve decided to cover the home office deduction. This is one of those deductions that some small businesses worry about taking. And I hope this Tax Tip will clear up some confusion you may have about it yourself.

So let’s dive right in.

Home Office Deduction

  • If your office space is located in your house, you can deduct your bills for utilities, homeowners’ insurance, homeowners association fees, security, and general repairs and maintenance. Mortgage interest and property taxes are deductible expenses if you qualify for home office deductions. You can deduct the percentage of the square footage of your office divided by the total square footage of your house.
  • Calculation

Tax Rate X Savings

House is 4,000 sq ft and your office is 1,000 sq ft. And your rent is 4,000/mo. 25% or 1,000/mo is deduction. Which is 12,000/yr X the income tax rate.

Administrative Home Office Deduction

  • Business owners who have a business location outside of their home, but also maintain a home administrative office for running the business can claim the home office as their primary office. As a result, all mileage for business purposes from the home office is deductible, including trips to office(s) outside of the home.
  • Calculation

Tax Rate x Mileage Rate x Estimated Mileage

What I hope you take away from this tip

Like many small business owners I’ve spoken with, you are probably thinking that taking these type of deductions would send up a red flag to the IRS. In reality a tax return without home office already has a 3.1% chance of being audited and when you apply either of these home office deductions your chance of an audit goes up to 3.2%.

And as you can see from the Home Office Deduction and the Administrative Home Office Deduction tips, Real Estate professionals and other small businesses like yourself who maintain a home office as your primary place of doing business can achieve significant tax savings when you properly apply these types of deductions.

There are many more deductions and credits that we can effectively apply to reduce your taxes and increase your net revenue. Small business owners should not be afraid of tax deductions and incentives intended by the government to help you legally reduce your tax burden.

I always advise anyone running a business to always seek out tax advice from an expert Tax Planning Professional before implementing any kind of tax incentives on your own. And if you do that you could be well on your way to significantly reducing the tax burdens for your business and thereby increasing your net revenue.

I hope this helps and if you have any questions or comments feel free to reach out to me here on LinkedIn and make sure to check us out at The Tax Planning Pros.

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