With all the IRS changes to home office deductions, I'm wondering how other consultants are handling this. I've got about 300 sq ft dedicated to utility bill analysis work in my Hartford home. The simplified method gives me $1,500 but actual expenses might be higher with my setup. Anyone else running the numbers on this?
Anyone else dealing with home office deduction changes?
I went with actual expenses last year and came out ahead. My Tulsa office space is about 250 sq ft and with all the specialized software, extra monitors, and dedicated phone line for client calls, the actual method saved me about $800 more than simplified. Worth doing the math both ways.
Frank here from Cleveland - I'm still using the old method for now. My accountant says to stick with what works until we see how the new rules shake out. Been claiming about 18% of my home expenses for the past three years without issues.
The simplified method is tempting but I've got too much invested in my setup. Between the industrial scanner for analyzing tariff sheets and the dedicated server for my analysis software, my actual expenses are running about $3,200 annually just for equipment depreciation.
Good point on the equipment depreciation. I hadn't factored in my new HP scanner and the extra electrical work I had done for dedicated circuits. CL&P charges enough here in Connecticut that the extra electrical usage alone probably pushes me over the simplified method threshold.
Down here in Miami with FPL rates, my home office AC costs are brutal in summer. Running dedicated cooling for all the computer equipment adds up fast. My CPA calculated about $2,800 in actual office expenses versus the $1,500 simplified method cap.
MidAmerican rates aren't too bad here in Des Moines, but I'm still going actual expenses. The key is keeping good records from day one. I track everything in QuickBooks - utilities, insurance, repairs, the works. Worth the extra paperwork for the tax savings.
One more thing - make sure you're not double-dipping on any business equipment purchases. If you claimed Section 179 depreciation on office furniture or computers, you can't also include those in your home office calculation. Learned that one the hard way during an audit.