Collaborate on Home Rent Receipt Format for Small Businesses with Ease Using airSlate SignNow

Home rent receipt format for small businesses

tell me why are you not taking the home office deduction comment below my name is sherman the cpa and today i want to help you save more money on taxes by showing you how to write off your home expenses as a business owner doesn't matter if you rent or own your home if you do any work for your business from home you can likely take this tax deduction so if you want to deduct some of your mortgage payments rental expenses property taxes home insurance utilities and so much more make sure you watch this video until the end if you don't mind lending a helping hand here please hit the like button below to help this video reach more people just like yourself [Music] all right so what is the home office deduction ing to the irs the home office deduction allows qualifying taxpayers to deduct certain home expenses from their tax return for example if your business earned one hundred thousand dollars in income but you incurred ten thousand dollars in eligible home expenses then you can deduct these expenses and lower your taxable income to 90 000 which will in turn lower the amount of taxes that you will have to pay now let's discuss the rules to qualify to take this deduction first of all all homeowners and renters qualify for the home office deduction as long as you are taking the deduction as a business owner now you cannot take this deduction as an employee employees who work from home are not eligible for this deduction so if you receive w-2 wages and you want to use this deduction for that business then unfortunately you would not qualify for this deduction but if you are not an employee and own a business or operate as an independent contractor then you would be a qualified taxpayer and if that's you here are the things you can deduct you can deduct your mortgage interest your rent property taxes homeowners insurance hoa expenses utilities and even depreciation now here's the catch you cannot deduct 100 of your home expenses you can only deduct the portion of your home expenses attributable to your home office you must use an exclusive portion of your home for conducting your business and you must allocate your home expenses to that exclusive portion of your home that you're using for your business for example you cannot use your bedroom space as a home office expense because you do not exclusively use your bedroom to work on your business you sleep there however if you use a dedicated space like an office garage basement or any part of your home exclusively for your business then you can use the home office deduction to lower your taxable income and pay less taxes now let's go ahead and talk about how you can go about calculating your home office deduction the irs provides two methods to calculating your home office deduction the simple method and the regular method now the simple method is very simple so simple that it does not save you much money basically with the simple method you can deduct five dollars per square foot of the business use of your home but here's the kicker you can only do this for up to 300 square feet this means that the maximum you can deduct under the simple method is 1500 if you have a 300 square foot home office space but what if you literally have a 1 000 or 2 000 square foot office that you use for your business or what if you store all of your inventory in your basement or you work in your garage like steve jobs or make products in your kitchen or what if you do have a 300 square foot home office but the portion of your home office expenses for the year exceeds 1500 by far well if this is anything like you then you should use my favorite method the regular method to calculate your home office deduction the regular method takes the exact square footage of your home office and divides it by the total square footage of your home to find the percentage of your home that is being used for your business then it applies that percentage to all of your home expenses to find the direct expenses that are applicable to your business to further explain let's walk through an example let's say you own a 3 000 square foot home and let's say 1 000 square feet of that home is being used for your business well 1 000 divided by 3 000 square feet is 33 so that'll be the percent of your home being used for your business now let's go ahead and add up your monthly expenses let's say your mortgage or rent is 2 000 per month plus 500 for utilities and other home expenses so let's just call it 2500 per month now since you're filing your taxes for the whole year then you will need to multiply your home expenses by twelve twelve times twenty five hundred dollars equals thirty thousand dollars for the year so now you have thirty thousand dollars in home expenses and we know thirty three percent of your home is being used for your business so to find out what your home office deduction is you'll just multiply thirty thousand dollars of your home expenses by the thirty three percent of your home that is being used for your business which would mean your home office deduction for the year would be ten thousand dollars instead of fifteen hundred dollars under the simple method anyway that's how the regular method works for writing off your home expenses so now your job is to determine the square footage of your home office and divide it by your total home size to find out the percentage of your home that is being used for your business then tally up all of your home expenses and apply that percentage to find out your home office deduction under the regular method and don't forget home expenses like your utilities your insurance your hoa expenses property taxes and other eligible home expenses that you pay for drop a comment below and let me know if you plan on taking this deduction this year and as always thank you for watching i look forward to seeing you in the next episode