Home Office Deduction

The IRS provides tax tips via YouTube videos. The tax tips concerning home office deduction can be viewed here.

Here is a summary of the home office deduction that self-employed and employees who use a portion of their homes for business purposes may be able to take.

• Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly as your place of business, or as a place to meet with customers or in any connection with your trade or business where the business portion of your house is a separate structure not attached to your home.
  


• For storage use, rental use, or daycare-facility use, you are required to use the property regularly but not exclusively.
  
  
  
• The amount you can deduct depends on the percentage of your home used for business. Your deduction will be limited if your gross income from your business is less than your total business expenses.
  
  
  
• Special rules apply to qualified daycare providers and for people storing business inventory or product samples.
  
  
  
• Form 8829, Expenses for Business Use of Your Home is used by self-employed people to figure the home office deduction. That deduction is then reported on Schedule C, Profit or Loss From Business.
  
  
  
• Additional rules apply to an employee such as the regular and exclusive business use of the home must be for the convenience of the employer.
  

Additional information can be found in IRS Publication 587, Business Use of Your Home.

Congress Retroactively Reinstates Airline Excise Tax Then Provides Relief For Retroactively Reinstated Tax

This week Congress extended the Federal Aviation Administration's authority to collect federal passenger air transportation excise taxes ("ticket taxes'). On the brink of a possible government shutdown, the FAA budget authority expired on July 22, 2011. Airline tickets purchased between July 23 and August 5 were not assessed the ticket tax. The Congressional action retroactively reinstated the tax. However, the IRS is providing relief to purchasers of tickets and will not attempt to collect any unpaid taxes from the purchasers or the airlines.

Even the IRS recognizes that assessing and collecting taxes retroactively is foolish and nearly impossible to enforce.

All In The Family

If you own a trade or business and have a child under 18 that are capable of providing services, hiring him could provide a tax benefit for both you and the child. Payments to a child under age 18 are not subject to social security and medicare taxes if the business is a sole proprietorship or a partnership that both parents are the only partners. The payments are also not subject to federal unemployment tax.

Wages to a child are subject to social security , Medicare, and FUTA taxes if he or she works for:

A corporation, even if it is solely owned by the child's parent,

A partnership unless each partner is a parent of the child,

An estate, even if it is the estate of a deseased parent.

If you own your own business and have minor children that could work for you, now would be a great time to plan ways to minimize taxes for both you and your children.