Studio as a tax write-off/home office

gjl711 wrote in post #6481621
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...

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

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.

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.