Expense deductions for shop/ office space question

[SouthSoundTree]

Coming up on tax time and wanting to know that we are deducting a maximum reasonable amount for shop and office space.

Wondering how you all figure this.

I have all my equipment at my property, using outside space for employee/ work truck/ chipper/ trailer parking, wood processing (some for sale, some for home use), indoor space for firewood storage/ stump grinder/ work benches, etc. Water and electrical available as needed.

 

[NeTree]

Deduct the percentage of your utilities related to your business. Figure out the percentage of your property that's occupied with business use, and deduct that percentage of your taxes, mortgage, etc.

 

[SkwerI]

An accountant would be your best resource, but I've heard that the home office deduction is one of the common triggers for an audit. Obviously in your case you're using a good amount of your home and property to support your business so it's probably worth it to take the deduction. In my case I don't do hardly anything at home and I have a lot of other deductions anyway, so I don't take the home office deduction.

 

[NeTree]

 

[pigwot]

It is a flag, but not an automatic audit; take a look at:

Home Office Deduction

 

[SouthSoundTree]

My bookkeeper (don't know what exactly makes an accountant) who works for a CPA has instructed me to find "comparable" rental space at fair market value, and deduct this. I'm not worried much about utility expenses, nor the home office part, as much as the shop space, parking space, and outside work space.

Just interested to hear others' experiences and methods.

 

[SkwerI]

You pretty much get to make up your own number. Just be prepared to justify it with documentation on comparable costs for renting a similar location. Easy enough, but like Patrick said it can be a flag.

 

[Paul B]

My accountant (aka my dad) uses square footage % deduction. keep it reasonable and you will keep the red flags at bay. Get greedy and you will get hassled. Same as shared mileage on a work/personal vehicle.