Home Office Deduction (Course Id 720)

Taxes - Taxes for Course Id 720

Each year the U.S. Census Bureau publishes what it refers to as nonemployer statistics that may provide information about the increased importance of the business use of taxpayers’ homes. A “nonemployer,” for purposes of the statistics, is defined as a business that has no paid employees, has annual business receipts of at least $1,000 and is subject to federal income taxes. These nonemployers may be organized as corporations, partnerships or sole proprietorships. Because they have no paid employees, nonemployers are more likely than others to operate their businesses from their homes and seek a home office tax deduction.

The data supplied on nonemployers show a generally increasing number of these businesses, from a total of 19.5 million in 2004 to 26.5 million in 2018. Although they have no paid employees, they account for significant receipts. In 2004 they produced receipts of $887 billion; by 2018, those receipts had grown to $1.3 trillion. Clearly, the likelihood that any tax return preparer will be required to prepare a taxpayer’s tax return with a home office deduction is significant and is becoming more likely each year.

This course will examine the federal income tax deduction for business use of a home and will discuss:

• Qualifying for a home office tax deduction;
• Determining a taxpayer’s home office deduction using the actual expense and simplified methods;
• The special home-office deduction rules that apply to daycare facilities;
• The taxpayer’s home-office deduction recordkeeping requirements; and
• Where to take the deduction and the forms a tax preparer must use in connection with it.

NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents - 720

Course Learning Objectives

• Apply the home-office deduction qualification rules;
  
• Identify the types of home office use to which the exclusive use requirement does not apply;
  
• Describe the various types of taxpayer expenses that may be used to support a deduction for business use of a home;
  
• Apply the rules applicable to the simplified method of figuring the home-office deduction;
  
• Identify the tax forms on which a home-office deduction should be taken; and
  
• Recognize the recordkeeping requirements applicable to documents supporting a taxpayer’s home-office deduction.

Chapter 1
Qualifying for a Home Office Deduction

• Recognize the general requirement for exclusive use applicable to home-office deduction and the exceptions to the requirement;
  
• List the requirements that apply to a taxpayer’s qualifying for a home-office deduction for purposes of storage of product samples or inventory;
  
• Identify the conditions a taxpayer must meet in order to qualify for the exception to the exclusive use rule when operating a daycare facility;
  
• Recognize the factors that must be considered to determine if a taxpayer’s home is the principal place of business for purposes of the home-office deduction; and
  
• List the exceptions to the requirement that a home office must be the taxpayer’s principal place of business in order to qualify for a home-office deduction.

Chapter 2
Figuring the Home Office Deduction

• Distinguish between the actual expense method and simplified method of figuring the home-office deduction;
  
• List the expenses normally deductible by taxpayers using a home for business purposes who use the actual expense method;
  
• Recognize the limits applicable to a home-office deduction; and
  
• Calculate the home-office deduction for daycare facilities

Chapter 3
Deducting & Recordkeeping

• Identify where expenses of a home office are deducted; and
  
• Recognize the recordkeeping requirements applicable to taxpayers taking a home-office deduction.

Course Learning Objectives

Introduction to the Course

Chapter 1 - Qualifying for a Home Office Deduction

Chapter Learning Objectives

Introduction

Home-Office Deduction Requirements

Exclusive Use Requirement

Exceptions to Exclusive Use Requirement

Storing Inventory or Product Samples

Use as a Daycare Facility

Regular Use for Trade or Business Requirement

Home Office Used on Regular Basis

Home Office Used in Connection with a Trade or Business

Principal Place of Business Requirement

Administrative or Management Activities

Taxpayers with More than One Trade or Business

Exceptions to Principal Place of Business Rule

A Place to Meet Patients, Clients or Customers

A Separate Structure

Summary

Chapter Review

Chapter 2 - Figuring the Home Office Deduction

Chapter Learning Objectives

Introduction

Methods of Figuring the Home-Office Deduction

Actual Expense Method

Nature of the Expense

Percentage of the Home Used for Business

Calculating Percentage of Home Used for Business

Deductible Expenses for Home-Office Deduction

Expenses Deductible by All Homeowners

Expenses Deductible by Taxpayers Using a Home for Business

Depreciation

Insurance

Rent Paid on Unowned Property

Repairs

Security System

Expenses for Utilities and Services

Deduction Limit

Figuring the Deduction Limit when Taxpayer has Multiple Places of Business

Simplified Method

Depreciation and Actual Expenses Related to Use of Home not Deductible

No Deduction of Actual Expense Carryover

Expenses Deductible Irrespective of Business Use

Special Rules Applicable to Simplified Method

Shared Home Use

Multiple Qualified Business Uses

More than One Home During the Year

Part Year Use or Area Changes

Gross Income Limitation

Determining the Home-Office Deduction for Daycare Facilities

Deducting the Cost of Meals and Snacks

Standard Meal and Snack Rates

Sale or Exchange of a Taxpayer’s Home Used for Business

Final Regulations on Deduction vs. Capitalization of Tangible Property Costs

Summary

Chapter Review

Chapter 3 - Deducting & Recordkeeping

Chapter Learning Objectives

Introduction

Where to Deduct Expenses of a Home Office

Self-Employed Taxpayer & Statutory Employee Deduction of Home Office Expenses

Expenses Deductible Irrespective of Business Connection

Deductible Mortgage Interest

Real Estate Taxes

Expenses Deductible only when Home is used for Business

Actual Expense Method

Business Expenses Not for Use of Home

Partners’ Deduction of Home-Office Expenses

Recordkeeping Requirements

Summary

Chapter Review

Glossary