Studio as a tax write-off/home office

[incendy]

If I use one of the rooms in my home as a studio for Micro Stock photography can I write it off as a home office on my tax return? I am not trying to cut corners or get away with something, just curious if this is how it works :)

[gjl711]

Yes, my wife runs a business from our home. It is a full time job and the office is 100% dedicated to the business. It has no home use what so ever. We worked it with our tax accountant to deduct not only the office itself, but a percentage from everything going into the house, utilities, repairs and such. There are some pretty strict rules and setting things up was not simple so I would highly advise seeking the help of a tax professional. But if the room is devoted fully to you buisness and has no other personal use then it can be deducted.

[incendy]

Yes, my wife runs a business from our home. It is a full time job and the office is 100% dedicated to the business. It has no home use what so ever. We worked it with our tax accountant to deduct not only the office itself, but a percentage from everything going into the house, utilities, repairs and such. There are some pretty strict rules and setting things up was not simple so I would highly advise seeking the help of a tax professional. But if the room is devoted fully to you buisness and has no other personal use then it can be deducted.

I will definately do that, thanks for the information! By any chance do you know approximately how much of a write off a home office is?

[FlyingPhotog]

I will definately do that, thanks for the information! By any chance do you know approximately how much of a write off a home office is?

It's generally based on a percentage of total square footage...

[incendy]

It's generally based on a percentage of total square footage...


That makes sense, I can't wait to figure this all out. Buying my first home and one of the rooms is going to be just a dark room for stock photography but I still have a day job so not quite sure if it will work out or not.

[FlyingPhotog]

That makes sense, I can't wait to figure this all out. Buying my first home and one of the rooms is going to be just a dark room for stock photography but I still have a day job so not quite sure if it will work out or not.

You probably just shot yourelf in the foot a little. The IRS also has rules regarding deductions based on what they deem a "hobby" Vs a full-time profession.

[incendy]

You probably just shot yourelf in the foot a little. The IRS also has rules regarding deductions based on what they deem a "hobby" Vs a full-time profession.

It is still a job just not my full time job but I do hope to make money. No way I can give up my full time job though so if that is a requirement then I am afriad I will not qualify haha

[gjl711]

I will definately do that, thanks for the information! By any chance do you know approximately how much of a write off a home office is?

It's generally based on a percentage of total square footage... Yup, it's based on the square footage of the room. For us it's 10% or 12%, I can't remember which.

[gjl711]

You probably just shot yourelf in the foot a little. The IRS also has rules regarding deductions based on what they deem a "hobby" Vs a full-time profession. I believe that the rule is that you have to show a profit within the first 3 or 5 years. So you have to make more money than you are declaring as losses and expenses. For my wife it's pretty straight forward as it is her prime business and she is putting in 10, sometimes 12 hours a day and is showing quite a decent profit. Again consult your tax accountant/attorney to make sure you comply with all your local laws and ordinances. Some cities/towns/villages or whatever have issues with home based businesses. We are lucky as we live in an unincorporated area and don't have to deal with all that.

[tracknut]

Keep in mind that you'll be deducting the interest on your mortgage as well. On a new 30-year loan, depending on how much you put down, that can be the majority of your house payment.

Dave

[incendy]

Keep in mind that you'll be deducting the interest on your mortgage as well. On a new 30-year loan, depending on how much you put down, that can be the majority of your house payment.

Dave

I was trying to figure that out too, seems like I will save a couple of thousand a year! Which is awesome. Every little bit helps, first time home buyer so I am learning all kinds of things, some good and some bad :)

[tracknut]

I was trying to figure that out too, seems like I will save a couple of thousand a year! Which is awesome. Every little bit helps, first time home buyer so I am learning all kinds of things, some good and some bad :)

Yup! My point though, just in case you missed it, was that "writing off your den as a business expense" can be virtually identical financially to "writing off the mortgage on your den as a normal write-off", except that doing it for business purposes will require a fair bit more work to prove that you've dotted all your t's and crossed all your i's.

Dave

[gjl711]

Keep in mind that you'll be deducting the interest on your mortgage as well. On a new 30-year loan, depending on how much you put down, that can be the majority of your house payment.

Dave

I was trying to figure that out too, seems like I will save a couple of thousand a year! Which is awesome. Every little bit helps, first time home buyer so I am learning all kinds of things, some good and some bad :) The savings on mortgage are not as large as you think. You do get to deduct it which will lower your gross and if your on the boundary if the 15/25/35 bracket it might change you tax bill several hundred $$ maybe even over a thousand but usually its more a fraction of one single monthly payment.

[incendy]

The savings on mortgage are not as large as you think. You do get to deduct it which will lower your gross and if your on the boundary if the 15/25/35 bracket it might change you tax bill several hundred $$ maybe even over a thousand but usually its more a fraction of one single monthly payment.


It is sounding more and more like it might just not be worth the effort. Oh well, I will have a dark room finally regardless. It was getting a bit rough having to convert my living room back and forth daily :)

[gjl711]

It is sounding more and more like it might just not be worth the effort. Oh well, I will have a dark room finally regardless. It was getting a bit rough having to convert my living room back and forth daily :)
I wouldn't say that, every penny you get too keep is worth it. I have no problem paying my fair share of taxes, but no way am I going to give the gov a penny more than I have to.

[FlyingPhotog]

The savings on mortgage are not as large as you think. You do get to deduct it which will lower your gross and if your on the boundary if the 15/25/35 bracket it might change you tax bill several hundred $$ maybe even over a thousand but usually its more a fraction of one single monthly payment.

Very True...

I was all kinds of fired up to get my house and being 100% self-employed at the time, I figured I'd save the equivalent of a couple of payments a year...

Ummm...not so much... :(

[WMS]

This is an area which frequently is misunderstood and abused, hence it is also a frequently audited deduction. More information is available in IRS Publication 587. http://www.irs.gov/pub/irs-pdf/p587.pdf. The IRS website http://www.irs.gov/ also has a key word search function I would recomend home office as key words to use for this question.

Wayne

[convergent]

Your best bet is to get a good CPA to work with that can help you through this. There are a LOT of tax advantages in having a small business run from your home, not just the deduction of a percentage of your house. I've operated a successful business from my home for about 8 years and never claimed a percentage of my house, because my CPA advised against it. I have gotten many other advantages though.

Someone mentioned that you had to show a profit, and I don't believe there is any such rule. You DO have to operate it as a business though, and in a manner that you could achieve a profit eventually. That means things like forming a business structure... either sole proprietorship or LLC/S-corp. You would also want to have a business bank account and business credit card and keep your business and personal expenses from being mixed up. If you are selling, you need to deal with sales tax if its required on what you are selling. You may need to deal with insurance. You would want to have some actually business website, phone number, business cards, etc. So if you are really running a small business, regardless if you are making a profit or not, then it can be advantageous tax wise... but if you are thinking you will just designate a room in your house as a studio and then you can deduct it when you've not set yourself up as an official business, then you will likely get into a bit of trouble with the tax agencies.

[Sidnye]

I'm married to a CPA and i'd be very cautious on the "home business" write off. Talk to a tax advisor, there are very strict rules on home business write offs.

I write and do some photography for a local newspaper , not my main source of income by any means but I do make some $$ doing it.

My wife always shows that I make a profit from this hobby/business, not much of a profit but always some profit, like $100 in a year. I write off cameras and other equiptment but not so much as to show a loss.

IRS has red flags that trigger audits, and home business write offs and losses generated by 2nd hobby/business sets off red flags.