Sharon how are you? I'm down at Myrtle Beach with my girlfriends for goddess week and they're downstairs in the hot tub and I'm up here with you. Yeah talking about you know deductions for home office and all these fun things that I know you'd rather be doing than being in the hot tub. You got that right. So let's just go ahead and dive right in. I know this is a hot topic. We see a lot of questions on the message boards about what you can do and so I am here with you so you can make sure that we do exactly what we are supposed to do so we never have to wear stripes. There you go that's right. Well you know the home office is kind of one of those things that I think throughout the years has gotten a lot of bad press from accountants around the country. It used to be that accountants would say you have a better chance of being audited if you take a home office deduction. In this environment nowadays though how many people aren't working from home is more the better question. That's true. You know I don't I haven't seen any numbers on that but I bet it's more than double what it used to be. Absolutely absolutely and you know I mean the home office deduction there's some reasonings for doing it and we'll explain that today but it allows you to have an office in your home and as part of that you get to take some tax deductions related to that home office but you know there are some things that you need to understand and we're going to go through that today and kind of talk about it. So first. Wait I got a question. Okay. So if I'm a W, a lot of these people who are now doing home work are W-2 employees. So do they get to take a deduction? No. Okay so all right another question. Businesses get to write off their brick and mortar buildings and now if they don't have one and they're all home people it's a wash. They don't get anything either right? Oh okay just wanted to make sure I understood that. Sorry to interrupt. Let's go. That's okay. That's all right. That's a good question. You know I think one of the main concerns is that you need to understand the rule that says this must be an exclusive space and that's kind of the key. You know the IRS has ruled on this a lot of times and if you've got an office in your living room and you live in your living room and you watch tv and you eat and that's not an exclusive space. It has to be a designated space for your office. You know if you've got a home office or a place in the basement you designate that space for the office and you regularly use that exclusively for your business work. So that's a key. Okay and it's your principal place of business. Now what does that mean Sharon? Well that means for me you know because I do have a brick and mortar office with staff. You know I can't utilize the home office deduction if I'm working at home because I already have another office that's brick and mortar somewhere else. Okay all right now I have another question because I know that you have beyond the mask equipment when we record when you are at home. Right. What does that mean for you? So that could be utilized for beyond the mask as a expense for sure. Yeah since we have that business together. Because it's a completely separate business if I utilize that office for beyond the mask business then yes absolutely that is a deductible expense for that entity. Well I know that you you do that because I get videos of your children pretending that they're you and me taping in that office. That's right that's right and I do you know but it kind of goes back to you know exclusive space. So it is dedicated space but Sarah is a CRNA as well so she needs an office space because she doesn't have a brick and mortar office like you don't have a brick and mortar office right? Right. So it's your principal place of business you know for CRNAs that are 1099 there is a business component to this right? You're a business owner. You don't do your business in the OR do you? No. No you can't because you're focused on that patient. So being able to utilize the home office is a great benefit not necessarily is it going to save you a ton of tax money but it's going to open up another deduction to you. I'm going to explain that in just a minute but just so you understand CRNAs can take advantage of this if it meets these criteria. So there are two ways to calculate this. One is called a simplified option and I'll be honest for most people this is the option you should choose. You know it is very simplified it's five dollars per square foot times the amount of square footage that you use so if you got 10 by 20 office 200 square feet times five dollars is a thousand dollars that's your deduction. Okay. And the maximum you can have those 300 square feet per the IRS so the maximum deduction that you can take on the simplified method would be fifteen hundred dollars. Now the regular method is another way to do this it's more cumbersome convoluted and I'm not sure sometimes if it's really worth it but for some people it might be what happens is you keep track of your actual expenses you know every expense that you have for your home your electric bill maybe you have somebody that cleans your house maybe you have a landscaper your power or your power bill already said that but your internet your every bill that you get your property taxes everything that you get and whatever percentage your office space is of your total square footage of your house back to my example 10 by 20 is 200 square feet if you live in a 2,000 square foot house 200 is 10 of 2,000 so 10 of all those bills can now be deducted on your tax return. Which way do you come out better? That's why I say for most people the simplified option is probably better but the regular method you have to document and keep up with all this and there could be some recapture if you ever went to sell that property as well so for most people the simplified option is probably the way to go. I know Pierce does the regular method for us because you know he keeps up with every single penny that comes in and out of that house so he does the regular method. Yeah I mean you just have to calculate the numbers and see which way you come out better a lot of people don't even know about the simplified method to be honest with you so it is much more simplistic easier to take advantage of. So Sharon why would you want to do this? I mean obviously there is a tax benefit here to some extent right but $1,500 maybe $2,000 you know the taxes on that are 400 bucks maybe 500 bucks max why would you want to do this? Well let me explain why. One of the things that this enables you to do is you start work at your office every day but Sharon you get up as Sarah does she gets up in the morning she goes in the office and she checks her assignment sees what's going on that day maybe have to catch up some emails from her accountant handle some business things make sure she got paid from her vendors you know so that's business time so she starts her day in her office. What that then allows you to do is because you started in your office you now go to your workplace so that mileage between your home and wherever you go now can be a deductible expense because you started at home and now you're going to a different place. That make sense? Yes. Yeah without the home office you can't do that because then you start work when you get to the hospital. Got it. The home office gives you another deduction and that let's say you've got let's say you drove 10,000 miles a year. Well that's not a lot. That's not a lot but it's 65.5 cents a mile this year that's a $6,550 deduction now probably saves you two or three grand in taxes depending upon which tax bracket you're in and that's a bigger deduction. So the home office just so everybody knows is available. CRNAs do utilize it and you should utilize it properly. These are the things that are included in the deduction if you don't utilize the simplified method. Your rent, mortgage, even if you're rent you can still utilize this. I want people to understand that. Utilities, home improvements. So if you make home improvements that year guess what a percentage of that is for your home office. Taxes, landscaping, all those things go into that calculation. There's a lot of information out there about this. There are calculators that will help you do it but you do have to track all this. Now Sharon I've been doing this for a long time now. Yes. If it's one thing that I know CRNAs hate is to track where their money goes. Why everybody needs a Pierce. You know and I'm not saying everybody is but the majority of CRNAs don't want to set up on the budget and they don't want to track their spending. That's true. Back to what I'm saying earlier is the simplified method makes sense. It simplifies your life but the true value of the home office deduction is not really the home office deduction. It's the other deduction that we talked about a few minutes ago. So making sure that CRNAs are taking advantage of this. Make sure you understand the rules around it. Rules do change and we'll update this as things do change but right now it is something you should be taking advantage of Sharon.

home office deduction

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CRNAs

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