Can You Write-Off Your HOME? Yes. Here's How

In this video, I am going to show you how to write off portions of your home expenses legally using the latest tax rules. I'm talking about writing off portions of your mortgage, your rent, utilities, property taxes, and even things like your Wi-Fi, and any maintenance or repairs of your property. Whether you rent or own your home, there are several provisions in the tax code that may allow you to write off these types of expenses and reduce your taxes. So, today I'm going to walk you through them as a licensed CPA that tax plans every day at mycpacoach. com. So, let's jump right in. Okay, so let's set the stage here with a very easy one that most people are already probably familiar with number one, the mortgage interest

deduction. So, if you take the itemized deduction on your taxes, the tax law allows you to write off 100% of your mortgage interest on up to $750,000 of mortgage debt on your primary or secondary home. For example, if you make $30,000 of mortgage payments and half of those payments are going towards interest expense, then you would be able to deduct $15,000 of that interest expense on your taxes. If you have a HELOC or home equity loan interest, then this deduction can also be applied to home equity loan interest if the proceeds were used to buy, build, or improve your home. Now, let's move on to another easy one with number two, the property tax deduction, which was

actually just upgraded under the new tax rules. Property tax is 100% deductible with the state and local income tax deduction, also referred to as SALT. But, the new SALT deduction now allows you to write off up to $40,000 of state and local taxes like property taxes if you report less than $500,000 in income. Prior to this change, homeowners were only able to write off up to $10,000 of these types of taxes, which prevented a lot of taxpayers with very high amounts of property taxes from being able to deduct all of them on their taxes. This change will save taxpayers who take the itemized deduction a ton of money in taxes. And these are just some of the most basic types of home deductions. Let's go ahead and level this up a notch by getting into some rules that may allow you to write off almost any type of home expense you have from your rent, insurance, utilities, and so on. And that is number three, the home office

deduction, which is one of my personal favorites. So, simply having space in your home that is used for a trade or business may allow you to write off a large portion of all of your home expenses. The IRS is very clear that the business usage of a home is tax deductible when you use part of the home exclusively on a regular basis. Even if you're doing administrative activities for your business at your home, you may still qualify for this according to court law. For example, in the Soliman versus Commissioner tax court case, a doctor who routinely saw patients at hospitals was able to qualify for the home office deduction because he used his home exclusively for administrative work like billing, record keeping, and correspondence. So, in very simple terms, if you have a trade or business and you have space in your home where you exclusively work on that trade or business on a regular basis, then you may qualify for this deduction. And if you qualify, you may be able to write off a portion of almost all of your home expenses, like your rent or mortgage interest if you own a home, property taxes you pay, home owners or renters insurance, and any utilities you have, like electricity, gas, water, and yes, even your internet. Plus home repairs and maintenance fees you pay to contractors, and you can even write off the depreciation of your home, which is a non-cash expense that the IRS allows you to deduct on your taxes. Now, the portion you are able to write off will greatly depend on the business use allocation of your home. For example, if 10% of your home is exclusively used for your business and you have $50,000 of home expenses, you may be able to deduct $5,000 on your taxes. And if your business uses more space in your home, like let's say it was 20%, then your deduction will increase accordingly. The same is true if you have more home expenses. If your total home expenses increases, then so will your home office deduction and vice versa. So, if you qualify, a percentage of all of your expenses you incurred to maintain and keep the entire home up and running may qualify. And also any direct business expenses you incurred to set up or maintain the home office itself are also 100% deductible. Just comment home office below for an in-depth video guide on this, but in my world as a CPA, this is still a pretty basic deduction, so let's level this up another notch with number four, the Augusta rule. So, this

rule practically allows you to rent your personal residence to your trade or business or someone else without the rental payments being taxable to you. And people love setting up these types of arrangements through a trade or business because they receive two tax benefits. First, the rental payments will be tax deductible for the business, so you save money there. And the person receiving those payments would essentially be receiving tax-free income because it would be exempt under IRS rules. So, what exactly is going on here? Well, the IRS has a special exception for what they call minimal rental use. And basically, if you rent a dwelling unit for less than 15 days, they say that you don't have to report any of the rental income. So, for example, if I have a home and rent it to anyone, what they pay to me is not taxable as income if they rented my property for 14 days or less. That is the premise here. And when you have a business, which is allowed to deduct rental fees they incur to rent any property, you're basically able to set up this arrangement here that creates a deduction for the business for deducting rent without the recipient paying tax on the income they receive due to this IRS exception. For example, let's say that based on where I live, a fair daily rental rate for my property is $1,000 per day. And I rent my home to my business 14 times throughout the year, maybe to do board meetings, train employees, host networking events or parties, or whatever the case may be. It just has to have a business purpose. Well, the business would have paid me $14,000 throughout the year, which is tax deductible for them, and the $14,000 I received would not be taxable as income to me due to this special provision under Section 280A. Now, this entire arrangement has to be legit, and there are several rules you would need to follow to be compliant. Your rental fees have to be fair and reasonable. You need proper documentation. And ultimately, there needs to be an actual event or events happening at your residence. For an in-depth guide on this, just comment Augusta. But for now, let's go ahead and move on into a more advanced strategy to write off home expenses, and that is number five, company provided housing.

So, when we look at everything we covered so far, one thing stands out. When we use our property for a business, those property expenses become tax deductible, which begs the question of, well, if the entire property is owned by the business, which then provided housing to you as a benefit, could all of your property expenses be tax deductible? In very simple terms, it can be under the right setup. For example, C corporations are allowed to set up what is called fringe benefit plans, and one of the benefits you can set up under a plan like that is a housing benefit. And those benefits that shareholders or employees receive can even be exempt from taxes if they meet specific IRS requirements. So, on one hand, the C corp owns the property and deducts all of the property expenses plus depreciation, which can be huge, and on the other hand, the recipients of this tax benefit can exclude the value of this on their taxes if they meet specific IRS requirements. But if it does not meet those requirements, the fair market value of that housing benefit would be taxable as wages to the individuals receiving that benefit, which can result in higher taxes for them. So, you have to be extremely careful here. Not only that, but also keep in mind that you'd lose a number of individual housing tax benefits if you were to pursue something like this, like the section 121 exclusion that allows individuals to exclude up to $500,000 of their capital gains when they sell their primary residence. And the itemized deductions that we discussed at the beginning of this video. And that's just the beginning of things you need to consider. The decision to even set up a C corporation in the first place is a complicated one and there are also several rules and consequences you need to be aware of or else you could end up in a far worse situation with higher taxes. So, if any of this stuff peaks your interest, even if it's just a little bit, make sure you work with a qualified CPA who can run the numbers for you, analyze your situation, and best guide you through the IRS rules to help you reduce your taxes in a compliant manner. And if you need one, just apply to work with my team today at mycpacoach. com.