home office deduction

[hatothebib]

hey everyone. does anyone know if medical residents can take a home office deduction if they square away a portion of their home/apt. solely to read (since reading is a required part of our profession). i have tried to read the irs info, but i am not sure we could qualify for this. if so, it would be a huge deduction. any help is appreciated.

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[southerndoc]

No, you have to be a sole proprietor in order to do this.

You might be able to deduct certain expenses (computer depreciation, dedicated telephone line, etc.), but you're really pushing it and would likely get audited.

 

[nontrdgsbuiucmd]

hey everyone. does anyone know if medical residents can take a home office deduction if they square away a portion of their home/apt. solely to read (since reading is a required part of our profession). i have tried to read the irs info, but i am not sure we could qualify for this. if so, it would be a huge deduction. any help is appreciated.

I'm a bit fuzzy on what the benefit would be of the home office deduction -- I've taken it some years when I'd owned a small company and did a fair amount of work out of one area at home, my reasoning was that I could deduct from taxable income a portion of utilities and maintenance cost related to that portion of my house. But the dollars involved were tiny -- say 10% of my house was used for this purpose, and utilities cost 3,600 per year -- this would reduce my taxable income by 360 per year; even at the 25% bracket (if there is one) that'd save a whopping $80 per year in taxes, probably not worth the effort of filling out the forms.

There may be more of an incentive to take this deduction if you meet the guidelines and are in an apartment -- in a house you can deduct the interest from the mortgage regardless, so there's really no benefit to deducting, as in the example above, 10% of the interest via the home office deduction and 90% via the 1040 schedule A, rather than 100% of the mortgage interest on the schedule A.

 

[schwab]

I'm a bit fuzzy on what the benefit would be of the home office deduction -- I've taken it some years when I'd owned a small company and did a fair amount of work out of one area at home, my reasoning was that I could deduct from taxable income a portion of utilities and maintenance cost related to that portion of my house. But the dollars involved were tiny -- say 10% of my house was used for this purpose, and utilities cost 3,600 per year -- this would reduce my taxable income by 360 per year; even at the 25% bracket (if there is one) that'd save a whopping $80 per year in taxes, probably not worth the effort of filling out the forms.

There may be more of an incentive to take this deduction if you meet the guidelines and are in an apartment -- in a house you can deduct the interest from the mortgage regardless, so there's really no benefit to deducting, as in the example above, 10% of the interest via the home office deduction and 90% via the 1040 schedule A, rather than 100% of the mortgage interest on the schedule A.

A lot of things are included when doing the home office deduction. It's not just a percentage of rent/mortgage and utilities, it's also painting/repairs for the office (full), homeowner/renter insurance (percentage), HVAC repairs (percentage), HOA/Condo Association fees (percentage), property tax (percentage), and some others. Additionally, you can depreciate your office and claim that phantom loss on your taxes, which is a pretty great benefit!

The 10% figure you claim seems low. You're allowed to figure that percentage using "any reasonable method" which are most commonly a percentage of the total square footage of the house (e.g., one 250 sq ft. bedroom in a 1000 sqft house = 25%) or by number of rooms (e.g., you have 6 rooms in the house, one used for business = 17%). Obviously, you pick the one that's best for you.

For more info, check out IRS Pub 587: http://www.irs.gov/pub/irs-pdf/p587.pdf

 

[nontrdgsbuiucmd]

thanks for the clarification, I think we'd claimed this when our upstairs was not really used for much, so the whole 800 sf or so floor became our "office"; whereas now there's only a small room on that floor that's solely being used as an office; 100 square feet of a 2800 sf house = limited value for us now of the "home office" deduction.

Yeah I can see depreciation helping a fair amount, for any readers unfamiliar with this idea, typically real estate (at least commercial, I suspect residential is similar) is assumed to have a 'useful life' of 30 years, so each year 1/30 of the value can be counted as an expense against income, or in this case part of the home office deduction. This would include only the value of the structure, not the land value which is assumed to retain it's value.