My business is structured as a sole proprietor right now. I just had a few questions since I’m doing this on my own on turbo tax home and business.
I have a dedicated home office I’m writing off. Can I write off my mortgage interest/taxes on the business AND again on personal taxes, OR can I only write off my taxes/interest on one or the other??
I know to write off utility bills, I need to only use the % I got from my home office sq ft, BUT what about bills directly related to my business (like domain hosting, toll free #, marketing fees, etc)?
Also, if I have NO income can I still have these write offs?? They are legitimate, I DO have a home office. I DO have marketing/business bills, etc…
(This ones iffy). I bought a new tv. It isn’t physically located in my “home office” but in another room. Can I write off a portion of the purchase price since I use it a certain % of time for business viewing? Same goes for a new cell phone…?
As long as your sole proprietorship is a legitimate business and all that are legitimate business costs, then yes, you can deduct all that. However, I’d put the TV in your home office. So, you didn’t make any income last year, do you at least have a reasonable expectation for making an income in this business? If so, then you can still have write offs even if you had no income for the year. You can simply carry your losses over to next year’s income.
Thanks for the reply! One question, which is one that I’m probably most unclear about is:
Can I write off my home mortgage interest/taxes on the business AND again on personal taxes, OR can I only write off my taxes/interest on one or the other?? The reason I ask this is because in Turbo tax, it allows you to write off my TOTAL INTEREST PAID on my mortgage for my business…and I’m assuming it will allow me to make the write off again when I do my personal taxes (not business)? Sorry for the stupid questions…
Also, you mentioned I can write off the tv. To me it’s iffy because it’s not in my home office and because its a big tv. Would it seem more legitimate if I only wrote off a portion of the price if I use it for property pictures, educational material, etc (about 40% business)?
I would forget about the TV. You bought it and installed it in another room of the house, so clearly your intent for the purchase was personal/family use. It is not dedicated solely to business use, so forget trying to fabricate a business expense here.
Surely you already have other TVs in the house you could move to your home office if the exclusive purpose of the TV is to watch real estate training videos. Especially hard to justify the purchase of a TV as a reasonable and necessary business expense when the computer that you already have in the office is probably equipped with a CD/DVD player. You can watch your educational videos just as easily on your computer.
First let’s talk about TurboTax. TurboTax does not “let” you write off the TOTAL mortgage interest and property tax paid as a business expense. TurboTax asks you to fill in a blank and just works with the number you fill in.
I don’t use the home and business edition, so I don’t really know if TurboTax asks you to tell it how to allocate your taxes and mortage interest between your house and your business. It it does not, then TurboTax assumes that you know how to handle the allocation of property taxes and mortgage interest when you have a home office. You are supposed to allocate your mortgage interest and your property tax between the portion of the house you use personally and the portion of the house you use exclusively for your home office.
Let’s say the room of your house that you have designated for exclusive use by your business measures out to 150 sq ft (12’ x 12.5’). Let’s say that your entire home has 2500 sq ft of heated living space.
Based on the square footage, 6% of your home is reserved for your business and the rest of the home is for your personal use. 6% of the mortgage interest and 6% of the property taxes are business expenses on your Schedule C, while the other 94% of the taxes and mortgage interest is deducted on Schedule A (provided you itemize).
If TurboTax does not do the allocation for you, then you have to do some arithmetic yourself and then enter the appropriate portions of the total tax/mortgage interest paid on Schedule C and Schedule A
If you are a sole proprietor, your losses are not carried forward, but reduce other taxable income this year.
You are not required to have profit, but you DO need to be “in business.” Businesses make money; hobbies don’t. If you don’t show some income within a few years, be prepared to justify that you are, in fact, “in business.”
The percentage of expense that is able to be deducted is determined by the total square footage of your home office in relation to the size of the entire building.
So, if you have a 2000 sf home and your office is 500 sf, then 25% of mortgage interest goes on your schedule C, the remainder on schedule A. You already seemed to know that the utilities are deducted as a %, the same concept applies here. You didn’t mention depreciation, remember that you are entitled to a portion of that as well.
The business expenses not related to your home are deducted on schedule C… forget about the TV.
These are legitimate expenses, but without any income, you can’t really write them off. Loss deductions are limited and will generally be carried forward until they can be offset with income.
These are legitimate expenses, but without any income, you can't really write them off. Loss deductions are limited and will generally be carried forward until they can be offset with income.
this is incorrect. For a sole proprietor, expenses in excess of revenues are a loss that offset other 1040 income.
losses for a sole proprietor are not carried forward, they are used in the current year.
rental income/loss (Sch E) follows different rules.
It was an “iffy” deduction…I just wasn’t sure about it.