Is the upside of the home office worth the downside (if any)?

Question

I do some consulting on the side for one company for which I received a 1099 for $7200. I also do a lot of side work for which I do not get paid. But in any case I use my home office for this work. The difference in my tax return by using the home office deductions is ~ $300 in my favor. Without getting into a whole discussion over qualifications, let's assume it does qualify, is it worth it? I understand there is something it affects if you sell the home and that it might be a "red flag".

Thanks,

-Jim

joetaxpayer · Accepted Answer

How much of that is from depreciation, which you'll get taxed on down the road? Everyone has their threshold, but is the extra tracking and forms worth it to you?

(side note, I have a client who tracked her medical expenses, pages of them for 2007. After the 7.5% floor, it added $100 to her deductions, and saved her $15. But how much time did she waste?)

You don't want to talk qualifications, but will that home office pass audit? Nothing else in that room?

JOE

removeps-groups · Answer

If you took depreciation for the home office, then you have to pay business property capital gain taxes when you sell your house, and you don't get the 250K/500K exclusion. If you make 200K profit selling your house and the business portion of your home is 25%, the home portion of 150K is free from taxes and 150

Paul Thomas, CPA · Answer

wroteWell, you do, but not for the home office portion.If you plan to buy something else - and move your home office there - you can do a Section 179 from office to office.  Maybe not worth the hassle and expense for most small offices.

jtpryan · Answer

Yes, I did do a schedule C. I never expected to get this 1099, but now that I did it threw all of this up. Maybe it's not worth it in the long run.

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D. Stussy · Answer

You should have (expected the 1099-MISC).  They had to issue it since theamount exceeded $600.00.

Arthur Kamlet · Answer

Almost all of my Sch C OIH clients do this to be able to deduct mileage.

Employees invloved in outside sales etc also can benefit, but have the 2% reduction.

A home office can convert nondeductible commuting miles into deductible business miles. Someone who puts on thousands of miles/year has a high incentive to set up a home office.

removeps-groups · Answer

How can you convert commuting miles to business miles?

Arthur Kamlet · Answer

Your first business trip of the day is from your kitchento your home office.  Last trip of the night from yourhome office to your kitchen.The rest of your work related mileage is business mileage.

Is the upside of the home office worth the downside (if any)?

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