Top IRS Tips to Know about the Home Office Deduction
IRS Tax Tip 2017-41
Taxpayers who use their home for business may be able to deduct expenses for the business use of it. Qualified persons can claim the deduction whether they rent or own their home. Use the simplified method or the regular method to claim a deduction.
Here are six tips to keep in mind about the home office deduction:
1. Regular and Exclusive Use. Generally, taxpayers must use a part of their home regularly and exclusively for business purposes. The part of a home used for business must also be:
- A principal place of business, or
- A place where taxpayers meet clients or customers in the normal course of business, or
- A separate structure not attached to the home. Examples could include a garage or a studio.
2. Simplified Option. To use the simplified option, multiply the allowable square footage of the office by a rate of $5. The maximum footage allowed is 300 square feet. This option will save time because it simplifies how to figure and claim the deduction. It will also make it easier to keep records. The rules for claiming a home office deduction remain the same.
3. Regular Method. This method includes certain costs paid for a home. For example, part of the rent for rented homes may qualify. For homeowners, part of the mortgage interest, taxes and utilities paid may qualify. The amount deducted usually depends on the percentage of the home used for business.
4. Deduction Limit. If the gross income from the business use of a home is less than expenses, the deduction for some expenses may be limited.
5. Self-Employed. Taxpayers who are self-employed and choose the regular method should use Form 8829, Expenses for Business Use of Your Home, to figure the amount to deduct. Claim the deduction using either method on Schedule C, Profit or Loss from Business. See the Schedule C instructions for how to report the deduction.
6. Employees. Employees must meet additional rules to claim the deduction. For example, business use must also be for the convenience of the employer. If qualified, claim the deduction on Schedule A, Itemized Deductions.
All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.
Additional IRS Resources:
- FAQs - Simplified Method for Home Office Deduction
IRS YouTube Videos:
Missed Property Valuation Protest Deadline?
Help May Still Be Available!
If a Texas property owner missed the protest deadlines in 2016 for protesting the 2016 valuations and subsequent property taxes imposed, there still may be some help available. This applies to both real property and business personal property.
Under Texas Property Tax Code, Section 25.25 (d), a property owner or the chief appraiser may file a motion with the Appraisal Review Board to change the appraisal roll to correct an error that resulted in an incorrect appraised value for the owner's property. However, the error may not be corrected unless it resulted in an appraised value that exceeds by more than one-third the correct appraised value. This motion must be filed prior to the property taxes being delinquent which, as of this writing, would be January 31, 2017.
If the appraisal roll is corrected, the property owner will pay a 10 percent late-correction penalty of the taxes on the new corrected value of the property. Still, this is a "better than nothing deal" for the property owner. For this section to apply, the property owner cannot have protested the property, or reached a settlement for a value on the property, during the year.
Note that the motion can be filed as late as January 31, 2017, and actually be heard by the appraisal review board on a later date, to be effective. However, the property taxes for the year must be paid prior to the January 31, 2017 date. If a reduction in taxes is achieved, a refund for any excess taxes will be issued.
So, with a large discrepancy, all is not lost when the protest deadlines are missed !
Steve M. Spencer, CPA
Questions? TACPA members, as part of TACPA's networking, feel free to contact Steve with your questions at firstname.lastname@example.org
From IRS Newswire... Nov 16, 2016
IRS, States, Industry Launch Second Year of Public Awareness Campaign: “Taxes. Security. Together.”
The Internal Revenue Service and its Security Summit partners today began the second year of their “Taxes. Security. Together.” campaign aimed at encouraging taxpayers to take stronger measures to protect their financial and tax data.
The campaign features a series of security awareness tax tips, a round-up of suggestions at the Taxes. Security. Together. web page and a one-page Publication 4524, Security Awareness for Taxpayers.
“These are common sense tips to help taxpayers ensure the security of their information,” said IRS Commissioner John Koskinen. “The Security Summit partnership between the IRS, states and industry has made great strides but we need taxpayers to ensure their information is secure as well.”
The IRS, state tax agencies and the tax community came together in 2015 to combat tax-related identity theft as a coordinated partnership. But they immediately saw that one partner was missing: taxpayers.
The IRS and its partners need the help of all taxpayers. The Security Summit also needs the help of tax preparers and businesses to share information and help educate clients and employees about security measures. For example:
- Always use security software with firewall and anti-virus protections. Make sure the security software is always turned on and can automatically update. Encrypt sensitive files such as tax records you store on your computer. Use strong passwords.
- Learn to recognize and avoid phishing emails, threatening calls and texts from thieves posing as legitimate organizations such as your bank, credit card company and even the IRS. Do not click on links or download attachments from unknown or suspicious emails.
- Protect your personal data. Don’t routinely carry your Social Security card, and make sure your tax records are secure. Treat your personal information like you do your cash; don’t leave it lying around.
e-Services - Online Tools for Tax Professionals
The IRS web site has a listing of online services designed for you, the practitioner. They break out into several topic areas which you may find useful. Take a look at some of these...
New Procedures For IDRs
According to an article in Tax Advisor by Sally P. Schreiber, J.D., IRS announced on November 21st that examiners in the IRS Tax Exempt/Government Entities (TE/GE) division have new procedures to follow when issuing information document requests (IDRs) to taxpayers in the course of examinations. "According to the IRS, the new procedures will allow open and meaningful communication between the IRS and taxpayers, reduce the burden on taxpayers and treat them more consistently, permit the IRS to secure more complete and timely responses to IDRs, give timelines in which IRS agents must review IDR responses, and promote timely issue resolution during the examination process."
For the full article, please click here.
Find a CPA
Use our CPA Referral Service to locate a Texas CPA in your area.
Just tell us what you are looking for and we will provide names of CPAs you can contact.
TACPA has several Preferred Vendors who commit to taking special care of our members. Encon Systems, a leading supplier of printers, and office supplies in Texas, is one.
As a TACPA member you can
save 20% to 30% on just about anything
you use in your office. (Occasionally even more!)
Naturally, we insist on great member service and our Encon rep is terrific. She provides exactly that!
Check out our Preferred Vendors. Click here.