Trader's home office deduction question

[tiddlywinks]

Is it that unusual to run a business out of an unused bedroom or even a garage that is not being utilized?

No, it is not unusual or far-fetched. However, trading is explicitly singled out in the tax code.

If it was true that filing a schedule C as a trading business unlocks a myriad of deductions, every bubba who makes a few dozen taxable (non-retirement account) trades a year would be doing it!!

If you go this route, you must dot i's and cross T's regarding everything. It is not the same as an employer requiring you participate in zoom meetings from home!

You can't even show trading profit or loss on a schedule C... there are only workarounds subject to the ire or acceptance of the IRS.

Seek expert advise such as Green trader tax.

 

[Girija]

Is it that unusual to run a business out of an unused bedroom or even a garage that is not being utilized?

No not all, but you see 300 is a round number and you also claim the max deductible. Hence the caution. What IRS does is something they only know. But we can do ourselves a favor by minimizing redheads. Don't take it personal.

 

[Girija]

No not all, but you see 300 is a round number and you also claim the max deductible. Hence the caution. What IRS does is something they only know. But we can do ourselves a favor by minimizing redheads. Don't take it personal.

Sorry not redheads I meant red flags.

 

[mukoh]

Home office deductions should be reviewed with your CPA first as they are a sure way to get audited and clawed back with interest and penalties.

EDIT.
If you have an LLC it can rent from you for $XXX (better below market rate) and thus you will have income from the LLC and a deduction to the LLC which is the safest way, but you are really pinching on the penny tax savings at a cost of audit and clawback.

 

[Overnight]

Is it that unusual to run a business out of an unused bedroom or even a garage that is not being utilized?

Certain items can very easily trigger audit. And the statement above raises immediate question for anyone. Is someone really foregoing 20 ×15 real-estate otherwise available for any other purpose...

How about a swimming pool? You have your laptop on the side of the pool, and 30x10 or 25x15 (or whatever to make it 300 SqF) is not an abnormal size for a pool.

So laptop at pool edge while in water, wifi connection to printer, cordless telephone near by. Maybe you could even deduct the cost of the chlorine!

 

[tiddlywinks]

How about a swimming pool? You have your laptop on the side of the pool, and 30x10 or 25x15 (or whatever to make it 300 SqF) is not an abnormal size for a pool.

So laptop at pool edge while in water, wifi connection to printer, cordless telephone near by. Maybe you could even deduct the cost of the chlorine!

Nah... add the pool and chemicals to medical deductions. By itself, It might get to the 7.5% of AGI threshold. If not, put in a jacuzzi and a steam room!

 

[VicBee]

With the huge number of employees working from home due to covid I'm sure lots of people will take the full deduct on the home office and I doubt the IRS will make a fuss.
On the other hand, it's far more complex (because subjective) to claim trader status and the IRS will definitely hit you hard if it determines you don't qualify, including taking the full home office deduction.

 

[Girija]

With the huge number of employees working from home due to covid I'm sure lots of people will take the full deduct on the home office and I doubt the IRS will make a fuss.
On the other hand, it's far more complex (because subjective) to claim trader status and the IRS will definitely hit you hard if it determines you don't qualify, including taking the full home office deduction.

Nice try that has been specifically outlined as non deductible. Working from home is different from self employment.

With the huge number of employees working from home due to covid I'm sure lots of people will take the full deduct on the home office and I doubt the IRS will make a fuss.
On the other hand, it's far more complex (because subjective) to claim trader status and the IRS will definitely hit you hard if it determines you don't qualify, including taking the full home office deduction.

Prior to 2017 it wd have been possible. But TCJA 2017 act specifically suspended home office deduction for employees. Only self employed can avail home office deduction.

 

[paladinhgwt]

I bought a home in January for 600K -- cash. I use 10% as a dedicated home office. Feel I qualify for TTS. How much do I expense?

Be warned taking home office deduction, triggers audits more often than not. I know a guy who was audited 3 years in a row for taking a home office. He didn't have to pay any penalty but be aware.

 

[dcwriter2]

been taking it for several years now, and I am legit -- photos of it and everything. Only I'm in a new house now and paid cash instead of using a mortgage as part of the calculation. But thanks for the warning.