Follow The Rules When Deducting Home Businesses

You’re probably wondering if you can tax deduct your business if you run it straight from your own home. Yes, it’s possible but there are rules you must follow. Join me in today’s episode as I share with you my expertise on this.

To your abundance!
Doug Andrew

Key Moments In This Episode
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00:00 Intro
00:36 What I do
00:59 Can you run a business out of your house?
01:36 Home occupation businesses
02:28 No personal effects
03:57 Here’s what I do
04:53 What I tell my clients
07:05 Look at all the expenses that can be deducted
07:49 Learn more

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Music
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Song: LiQWYD – Glow (Vlog No Copyright Music)
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Video Link: https://youtu.be/LrHW88Yc4CU

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Video by Nate Woodbury
BeTheHeroStudios.com
http://YouTube.com/c/NateWoodbury

#DougAndrew
#3DimensionalWealth
#AbundantLiving
Follow the rules when deducting 
home businesses. In this episode,  
I’m going to address the question head-on 
“Can you run a business out of your house?”  
Now, there’s a simple answer to this but I’m going 
to go deeper that will help you understand how you  
can tax deduct all of the expenses related 
to running a business out of your home.
So, my name is Doug Andrew and I’ve been a tax 
minimization specialist for more than 46 years.  
I’ve had many clients who are business owners. 
Many of which run businesses out of their home  
in addition to even having commercial office 
space or warehouse space just like me.  
And so, when people ask the question, “Can you 
run a business out of your house?” Of course,  
you can. I’m assuming what you’re really asking 
is “Can you run a business out of your house and  
deduct it? Be able to take advantage of tax 
deductions?” Yes, you can. But it’s imperative  
that you follow the rules. And I’m going to 
give you some horror stories of people who  
thought they were following the rules and they 
got disallowed when they were audited by the IRS.  
And I’m going to show you how I cover myself 
when I deduct the portion of my house that I  
use for my business. So, first of all, there 
are some home occupation businesses that it’s  
pretty much a no-brainer that you can deduct the 
expenses related to the square footage that you’re  
allocated in your home for that business such 
as a barber shop, a hair salon or what have you.  
But there’s a lot of people who run their 
businesses out of their home and they need to  
allocate or designate the space that is dedicated 
to running that business. So, the basic rules are  
that if you’re going to deduct a portion of the 
cost of the house, let’s say it’s the mortgage  
or the space or you allocate what part you’re 
renting for your business, you need to allocate  
that amount of square footage and you need to 
make absolutely sure that you have none of your  
personal effects in that area. So, let me give 
you a horror story. I had a client years ago that  
had been deducting his office in his home which 
most people can do. And the IRS challenged him  
on what he was deducting. Well, he had calculated 
it correctly based upon the percent of utilities  
and you know the lights and the heat and the air 
conditioning that was related to that portion  
of it because he calculated the percentage of 
that office that he used in his business. Well,  
the IRS actually came for the audit to his house 
and they said, “Show us the area you’re using.”  
They walked in and opened the closet that 
he had included in the square footage.  
And there was a sewing machine, his wife’s 
sewing machine. And they asked, “Is this  
sewing machine used in your business?” He goes, 
“Oh, no. That’s just my wife’s sewing machine.”  
And they disallowed it. You cannot have that space 
being used for anything else. And so you make sure  
that you calculate the square footage and that 
you have your business doing that. Now, how do  
you overcome that? Well, with my businesses, when 
I file uh the articles of incorporation or the LLC  
and we talk about the organization and the 
purpose. I make the purpose so broad that anything  
that we do that relates directly or indirectly 
to that business will justify having whatever  
is in that space. And so, I also make sure that 
my wife is either one of the members of the LLC  
or she is the sole member of the LLC. And you have 
to dot your eyes and cross your T’s. And whoever  
is on that and whatever the business purpose 
is must envelop the usage for what they find  
in that space. And so, if you calculate that and 
you have actually allocated an area of your home,  
you can use that and deduct the appropriate costs 
that are associated with that. Let me talk about  
how many types of deductions that a business owner 
can take whether you run a business out of your  
home or not. So, I have counseled many clients 
who were dabbling in starting their own business  
to actually get a business entity, register that 
with the state and make sure you file either a  
schedule C on your 1040 or an LLC. Because 
I’d recommend most business owners set up a  
limited liability company for their business 
or maybe even a corporation. There’s lots of  
reasons for that for liability protection and 
tax purposes. But once you have the legitimate  
entity and you have the broad description of what 
you can do in order to earn income or bring in  
revenue for that business, any expenses related 
to earning that revenue can be deducted. And so,  
my CPA years ago, I had him condense on one sheet 
of paper. And he came up with a listing of over  
210 different things that you can deduct on 
your tax return you file for your business.  
And it includes all kinds of expenses even travel 
expenses and entertainment and meals under certain  
conditions and what have you in seminars. And this 
is addressed in other YouTube videos and I would  
encourage you subscribe to this channel on how you 
can even tax deduct some of your vacation expenses  
if you hold business meetings and do it the way 
the IRS says. And it can include all kinds of  
things while you’re having a family vacation 
if you’re holding business meetings in that  
setting. And that’s why many corporations can tax 
deduct the conventions they hold because they hold  
business meetings for at least an average of 
90 minutes a day. You can do that too with  
your family if your family is all involved in the 
business. And all of our children have always had  
their own business entities where they filed a tax 
return and were able to tax deduct their portion  
of those expenses that are legitimate on their 
vacations. And I’ve been audited numerous times  
and they’ve never been thrown out. There’s 
over 210 on this one sheet of paper. And so,  
what you need to do is look at all of the expenses 
that qualify to be deductible as a business. And  
you can search online and see these. But once 
you understand that and you do it the way the IRS  
says, whether you run a business without being in 
your home or whether you include it in your home,  
then you can qualify for deductible expenses 
as it relates to any money you are spending  
to make money technically simply is deductible. 
You can justify it. But I would recommend you  
talk to your cpa or tax attorney to make sure 
you’re doing it the right way in case you get  
audited. So, if this is intriguing you, I’m a tax 
minimization specialist and I’ve had many, many  
clients get audited through the years and they 
came through with those audits with flying colors.  
If you want to learn more about how to redirect 
otherwise payable taxes to causes you support,  
be sure and subscribe to this channel and search 
other tax strategies. Not just for business  
owners but for any situation and you’ll learn 
things like why i’ve never owned an IRA, 401k.  
And I never will I’ve never owned a Roth and never 
will. Because there are tax advantage strategies  
that are far superior to those vehicles. So, 
subscribe. Check out this video next and search  
enter questions and I will continue to post 
content to answer questions just like this one.

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