Harlan asked if anyone counted 100% of a home equity loan
interest as a business expense IF 100% was used as a
business loan. Yes, I have many times BUT have recommended
strongly that client be able to track the actual business
use of funds such as a purchase of a Truck, Backhoe,
Tractor, snomobile or other business equipment and then
interest can be deducted on the Sched C since it is business
interest. As Harlan stated the interest on the regular
mortgage would be split between the 8829 and the Sched A as
to space or hours as in Dependent Care.

Particularly on Schedule Cs I have found that since many of
my clients use the mileage method for Trucks and Cars that
we must probe (our clients won't tell us) and use TaxTools
to figure interest that is deductable in addition to
mileage. Unfortunately 1098s are not usually issued by the
finance companies.

There is no better business rush than to save a client some
dollars!

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huskerchen <huskerchen[at]hotmail.com> wrote:

- quote -

In addition to those advantages already mentioned, I'll add
one possible advantage:

If your work requires driving or taking public
transportation and you have a home office where you do much
of your work, or perhaps your daily scheduling, billing,
administrative work for your work, you might be able to
claim all your driving or bus rides as business mileage
rather than commuting.

So if you usually have a 40-mile round trip commute each
day, but because you use your home office first thing in the
morning and last thing in the evening, you might be able to
convert 10,000 mi/year of otherwise nondeductible commuting
into deductible business mileage.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Bill wrote:
- quote -

Good advise to consult pub 587, for there you will find out
just where to deduct the business portion of the mortgage
interest and taxes, and it is NOT on schedule a. For to do
so instead of on either the form 8829 (for schedule c) or
separate worksheet (for employee home office expenses)
reduces the first tier of allowable expenses and thus
increases the deduction for depreciation in case of any
other limitations.

So then, we can't just "elect" to use schedule a first and
then take the rest on form 8829.

- quote -

Ah, the best advise of all.

ChEAr$,
Harlan Lunsford, EA n LA

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Rich Carreiro wrote:

- quote -

(above selectively retained; rest snipped.

I heard of a novel approach here recently, involving what is
called a 10-T election to treat home equity interest 100% for
business, and thus avoiding any allocation based on square
footage. Of course only the interest on the portion of the
amount borrowed qualifies for the 100% deduction.

Example would be, say 10% of floor space as office in the
basement, and of the 30,000$ borrowed on the line of credit,
20,000$ of it was to remodel the basement for the office.
With this scenario, 10% of the first mortgage interest is
deductible normally, plus 10% of the other 10,000$ second
mortgage, plus 100% of interest on the 20,000$ used
exclusively for business.

Anybody every done that?

ChEAr$,
Harlan Lunsford, EA n LA

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huskerchen wrote:

- quote -

A deduction of business expense on Schedule C reduces your
self-employment net profit. This reduces the amount of
self-employment tax; reduces taxable income; and reduces
AGI. AGI is used to limit other tax benefits. A deduction
on Schedule A only reduces taxable income and may be limited
by your income.

--
Alan
http://taxtopics.net

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Mortgage interest and property tax are already deductible on
Schedule A, so with the home office deduction, part of them
will be deductible on Schedule A and part on the home office
deduction.

You can deduct all your normal expenses and depreciate
office furniture and equipment, and take milage, etc whether
you take the HO deduction or not.

If you take the H.O. deduction you can also deduct a
percentage of utilities, repairs and other house expenses,
and deprecitation on the home. So these items are the only
advantage in taking the HO deduction.

ed

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<huskerchen> posted:

- quote -

Actually, that's sort of right, but also *not* right.

The two deductions are independent of one another:

1. You can deduct the mortgage interest, along with real
estate and income taxes paid to the state/city/county on
Schedule A, Itemized Deductions.

2. Separately, you can deduct the expenses of running your
"small business" (which is different than your 'day job').
If you choose to treat your home mortgage as one of those
expenses, there are "interest allocation" issues which arise
.... for which you should consult Pub 535. But, there are
also possible deductions for "business use of your home" ..
which would involve depreciation of that part of your home
dedicated to the operation of your business. Consult Pub
587.

Better yet, check this issue with a tax advisor. That
should get you started right, at least, and give you a
better understanding of the pros and cons. This is one of
those times when a wealth of knowledge can be very
important.

Bill

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"huskerchen" <huskerchen[at]hotmail.com> writes:

- quote -

You can also deduct a pro-rata share of utilities,
insurance, etc. If you own, you can depreciate a pro-rata
part of your house. If you rent, you can deduct a pro-rata
part of your rent.

- quote -

Correct. You'd deduct a pro-rata share of the mortgage
interest on your Sched C and the remainder on your Sched A.
No double-dipping.

But remember that to get the home-office deduction, the part
of the dwelling used for the home office must be used
*exclusively* for the home office. Any personal use in that
space turfs the deduction.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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"huskerchen" <huskerchen[at]hotmail.com> wrote:

- quote -

Get a Form 8829 from irs.gov. On that form you will be able
to calculate all the applicable home-office expenses
including depreciation. The main benefit of the home office
deduction from your Schedule C (self-employment income) is
the fact that it will reduce the amount of Self-employment
tax you must pay at the rate of 15.3% of the profit from
your business.

Wayne Brasch

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See form 8829.

Missy Doyle

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I have a fulltime job and I have been running a small
business out of my apartment for a couple of years. I just
bought a house and I am a little confused about home office
now. I know that the mortgage interest is deductible from my
W2 income. What is the benefit of deducting a home office as
a business expense? I suppose if the mortgage interest is
already deducted, I cannot deduct it for the second time as
a home-office right?

Thanks!

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