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Lil'John

Lil'John

Former #278
Joined
May 20, 2020
Member Number
488
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1,150
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Walking to the Rubicon
I know we have lots of Holiday Inn tax experts on here so I'm looking for some info before going to talk with a CPA.

I am setting up a home business and I understand most of the typical tax writeoffs are based upon size of office as a percentage of house squarefoot:
Write off electric %
Write off mortgage %

I'm running into issues on how internet service applies as a write off and especially if it has to be "business class".

Short: is it still % or is it difference in price between "common" and business class"?

Longer with details:
I'm in BFE where I can get unreliable, hi-latency wireless, doubtful I can do cellphone hotspot, or "business class" fiber optic service. My business requires high reliability low latency service. I won't be running multiple internet services to the house.

To make up some numbers for an example, let us say wireless is $100/mo and fiber is $400/mo. For purposes of business tax write-offs, which of the following is valid:
  • Full $400/month bill since it is mainly for business but some home use piggy backing
  • $300/month difference between wireless and fiber because the business requires the service but minus some home use
  • % of $400/month bill because it is a utility (I know this is the safest bet)
What says Irate? What is the highest I could write off without extreme risk of white collar jail time?:homer:
 
I expense all of it. Business cannot operated without it. I’m not a cpa nor has my guy ever asked that question.
 
UnfrozenCaveman said:
Look here ... https://www.irs.gov/businesses/small...fice-deduction

Then you can decide how you want to do it.
Click to expand...
I've already looked at that one... it does not cover the case of "required" upgraded utility. It covers "typical" office setups where you write off a % of the utilities as I've noted above.

The only part of the home office deductions I care about are utilities which I understand except for the internet where I require special service.
 
Lil'John said:
That is kind of my opinion but I really don't want to run afoul of the law because the whole house is going to be serviced by the same internet service.
Click to expand...

Then again my business owns the my house so I might be in a grey area.
 
If the business owns the house you have lots of options. Business pays expenses and lease it to yourself is best. Plus depreciate the home at the same time.

anyway, % of square ft equals % or utilities equals % of mortgage. I think you can also "rent" or "lease" the space to yourself as a business expense. There are different ways to set it up.

You can do 100% of internet because you wouldn't normally have it.

A lot of this will become more clear after Jan 1st. There will be tons of changes and clarifications because so many people work from home now.
 
Tiha said:
If the business owns the house you have lots of options. Business pays expenses and lease it to yourself is best. Plus depreciate the home at the same time.

anyway, % of square ft equals % or utilities equals % of mortgage. I think you can also "rent" or "lease" the space to yourself as a business expense. There are different ways to set it up.

You can do 100% of internet because you wouldn't normally have it.

A lot of this will become more clear after Jan 1st. There will be tons of changes and clarifications because so many people work from home now.
Click to expand...
House is fully paid off so no mortgage ;) Thus I'm trying to focus on utilities.

The concern I have over "business class" internet vs "normal residential" and tax-writeoff claims is the counter argument of "you don't need it" or "it isn't 100% used by business".

What have you heard coming down the pipeline?
 
First off, there are going to be so many fraudulent tax returns next year with so many people who "heard" they can deduct their whole house and whole car and all their expenses. That anyone who makes an effort to do it correctly will probably get skipped over. Right or wrong.

technically, yes you can only deduct the increase in internet cost. So if the opening standard package, well, I'll ad my situation. Wife started working from home before the Covid crap.
My internet was $92 a month. Because of her monthly usage we had to up it another 100 gig a month. Which was only $20 a month.
So to do it correctly I can only deduct that increase. So 12 x $20 is $240.

Your situation is the same, the correct way is to find the base residential package price. e.g. $60 a month, and if the business package is $120 a month. Then the proper way is to only deduct the $60 a month difference.
12x60= $720

If you were to get audited that is acceptable.
Writing off the whole thing is also possible, but for me it is not worth the risk of triggering an audit. I wouldn't gain anything by deducting the whole amount anyway, so I stay on the safe side.

In my situation I have 3 people at home taking online classes. Although they all have unlimited verizon data with mobile hotspots you get a pissed off irs agent and you would lose the battle. So that is not a battle I want when I have nothing to gain. Our combined income is enough that as much as we try we cannot make enough deductions to itemize. So don't risk it.

So many people increase real amounts thinking they are getting more money back. When in reality if they ran their taxes both ways they didn't gain anything but risking an audit. Audits are time consuming even if you do everything right.
 
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