Tax Tip #10
Small Business Tax Savings
Let's say you use 20% of your house as a home office, and you deduct depreciation and expenses for working in that part of the house. In the past, when you sold your house, 20% of the gain wouldn't qualify for the exclusion because that 20% wasn't used as a "residence." It was used exclusively as your office. And check IRS Publication 587 (.pdf download) on home office deductions.
Now the IRS doesn't care even if you used your home 90% for business as a home office. You can now exclude as much as 100% of your gain, up to the $250,000/$500,000 limit. You're only going to be subject to tax on the gain to the extent of depreciation taken on the building since May 7, 1997. But that's taxed only at a rate no more than 25%. Wow! That means, if you qualify, there's no reason not to claim a home office. And I know there are any numbers of people who work out of their homes who don't claim home offices now.
We go more in depth with these savings as you progress into a small home business, so enjoy this learning curve into small business tax savings and feel free to ask questions.
This website contains information related to law and is NOT LEGAL advice. It contents is for information only. If you need legal advice, please consult an attorney or act as your own.
All documents typed are prepared by Rica Gilmore.