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Tax Deductions for Small Business Owners Working From Home

Learn to Maximize your small business Tax deductions

This article shares the business use of your home for tax deductions. What's ok vs. what's not, along with examples.

The information in this article is for information purposes only. It's always best to work with a professional accounting firm like Schwartz & Associates CPA to stay compliant.

IRS "Newsroom" Article

In a recent IRS.gov newsroom article titled "How small business owners can deduct their home office from their taxes," they provided an easy-to-understand guide for tax deductions for small business owners working from home. Typically tax deductions have always been confusing for small business owners, so this official IRS.gov reference information is welcoming and helpful information to many.

In short, the IRS states,

"The home office deduction allows qualified taxpayers to deduct certain home expenses when they file taxes. To claim the home office deduction on their 2021 tax return, taxpayers generally must exclusively and regularly use part of their home or a separate structure on their property as their primary place of business."

Here are a few highlights from the article:

  • There are certain expenses taxpayers can deduct. These may include mortgage interest, insurance, utilities, repairs, maintenance, depreciation, and rent.
  • Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.
  • The home must generally be the taxpayer's principal place of business. 
  • Expenses that relate to a separate structure not attached to the home may qualify for a home office deduction.

The article goes into further detail and will provide you with all the information you need to stay within legal limits while maximizing your tax deductions.

As a best practice, it's always best to consult a professional accounting firm like Schwartz & Associates CPA to stay compliant. A little guidance goes a far way, especially when dealing with taxes. Mistakes can be costly and haunt small business owners for years to come.

US Chamber of Commerce "Finance" Article

The US Chamber of Commerce also released a newsroom article titled, "Getting Ready to File? Tax Deductions For Home-Based Businesses," that you may also find helpful as a small business owner looking to maximize your tax deductions.

The article states,

"Home office-related deductions are based on the percentage of your home that you use for business. To obtain this number, divide the square footage of your office space by the total square footage of your home. It is important that these calculations are accurate and that you only deduct the appropriate percentage of each expense."

For example, if you do meet IRS guidelines, you can deduct the following home-related expenses:

  • Homeowner's insurance.
  • Homeowners association fees.
  • Cleaning services or cleaning supplies used in your business space.
  • Mortgage insurance and interest.
  • Utilities, including electricity, internet, heat, and phone.

It's important to note that tax rules change often, so staying informed is vital to your small business's compliance. You always want to do what's correct and get the maximum tax deductions as a small business owner working from home. Negligence is not innocence, according to the IRS, so always perform your due diligence, and discuss any significant tax deductions with a professional accounting firm like Schwartz & Associates CPA before taking action.

Work with a Professional

If you have a business and are in the process of selecting a tax professional, we recommend you work with a professional with CPA credentials so that you and your business can be protected from losing vital data and overpaying taxes as a result. This happens very frequently and is something we have helped our clients with in the past. If you are looking to make the change but are intimidated by the process you can always reach out to our firm at info@rschwartzcpa.com . We look forward to speaking with you and assisting you as you look to make the right decisions when it comes to your business.

 

 

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HOW SCHWARTZ IS HELPING SOUTH JERSEY SMALL BUSINESS OWNERS

Navigating these legal changes and what it means for your small business in New Jersey can be one of the biggest challenges you face in the coming years. Fortunately, Schwartz & Associates is already familiar with relevant tax laws and regulations you need to comply with, including the impact of the Biden Administration's new tax proposals. The American Families Plan (AFP) and American Jobs Plan (AJP) will bring with them new taxes on businesses in the coming year, and Schwartz is prepared to ensure your South Jersey business is not only in compliance but maximizing its benefits.  

Contact us for more insight into what these changes may mean for your business specifically and what we can do to ensure you're getting the most out of your deductions. 

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