![]() You will be able to exclude the entire gain, up to the $250,000 or $500,000 limits, if you qualify. If the home office is within the same “dwelling unit” as the residential portion of your home, you are treated as using the entire home as a principal residence.įor example, if the office space was 10% of the total area of your home, you DO NOT have to pay income tax on 10% of the gain from the sale. ![]() General Guidelines for S-Corp Home Office Deductions or Reimbursementsĭeducting, or being reimbursed for, a home office today will no longer turn around and bite you when you sell your personal residence, as had been the case in the past. If your real estate taxes for the year are $10,000, but in the course of the year you were reimbursed $2,000 by the corporation, you can only deduct $8,000 in real estate taxes on Schedule A. Total up all the business expenses listed on the form, including the homear for these items. Multiply the total of these expenses by the business use percentage to determine the amount to be reimbursed. mortgage interest (taken from the monthly mortgage billing statement or a loan amortization statement you can create online).You must reduce the amount of your itemized deduction for real estate taxes and mortgage interest by the amount of reimbursement you receive from your corporation during the ye To be clear, this only applies if you claim the home office deduction if you have your own business and use a portion of your home for your business. alarm or office amount, and write a check from the corporation to yourself for this amount.List each item of expense paid during the month, such as: ![]() Calculate the “business use percentage” of your home office by dividing the square footage of the office area by the total square footage of the home. Include a Home Office section in the report. Staple receipts for these items to the report. Start out with lines for business mileage and other out-of-pocket business expenses, such as postage, office supplies, parking and tolls, meals and entertainment, etc. ![]() This is a good idea whether or not you have a home office. You should create a monthly “Employee Expense Report” form for your corporation. If you do not have any other place of business, such as a rented office or storefront, your home office should qualify.įor an expense reimbursement plan to be considered “accountable,” the expenses that are reimbursed must be for actual job-related expenses and you, as the employee, must substantiate the expenses by providing your employer with receipts or other documentation. This means the home office is required as a condition of employment, it is necessary for the business to function, or it is necessary for you to properly perform your duties as an employee. The space will be considered your principal place of business if it is used for performing administrative or management activities, such as billing, bookkeeping, ordering supplies, setting up appointments, and writing reports, and there is no other fixed location where you regularly perform these activities.Īs an employee of the S corporation, the home office must be for the convenience of your employer. To qualify as a home office, the space (it does not have to be an entire room) must be used regularly (on a continuous, ongoing or recurring basis) and exclusively (there can be no personal use) for your trade or business, and it must be your principal place of business or a place where you physically meet with patients, clients or customers on a regular basis. While your corporation can deduct the rent paid to you, you must report the rent as income on Schedule E. This option is better than having the corporation pay you rent for the home office. The corporation can deduct the amount of the reimbursement and you do not have to report the payment on your personal income taxes. It is an excellent way to get money out of your S corporation tax-free. Accountable Plan for S-Corporation Deductions and Reimbursementsīeing reimbursed under an accountable plan provides the greatest tax savings. The S corporation can pay you for the costs of a home office under an “accountable” plan for employee business expense reimbursement.The S corporation can pay you rent for the home office.If you are an employee of your own S corporation, you have a couple of choices for handling the costs of a qualifying home office: S-Corporation Home Office Deductions, Reimbursements, and Expenses
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