Financial Focus: Tax Season 2021: How to Track your At Home Expenses
By Professor Anthony Rivieccio MBA PFA
Working at HOME? Welcome to the new normal!. And prior to 2017, from a tax standpoint,there was a time that we could write off those ” at home ” expenses .
Today? Get ready for some bad news and maybe a great opportunity
The IRS generally has what I call a 2 step rule regarding AT Home expenses, today?
Are you self employed? It’s ok if you work in corporate America, but do you legally bring in side income? Sell cookies? Write a book? Coach people? Provide financial services?
Rule 1: You are allowed to deduct AT home expenses if your bringing in self employed income.
I would bet this eliminates 75% of readers — but read on, you might see an opportunity, like some of my Clients that offer the goods and services they sell above.
So congrats, you make self employment income! Do you use your home as an office ? You do?
Rule 2- create a separate place and use the measurements as your deductions.
In simple terms, let’s say you have a 1 bedroom, which has 4 total rooms ( not including bathroom). If you take, let’s say your foyer, like my client Joan, ( who you will meet in a moment) partition it and use it as your office, that would be 25% ( 1 divided into 4 ) of deductiblity of self employed expenses.
So now that you understand and passed the first 2 IRS rules, let me introduce you to a Client of mine: Ms Joan Morgan. You might know her, she’s the former Editor in Chief of Essence Magazine . Working for Corporate America , she would annually receive a W-2.
But some of you might know her as an award winning author. She has written: “When Chickenheads come home to Roost” & ” She Begat This: 20 years of the miseducation of Lauryn Hill”.
She puts these earnings into her ” self employed ” business that’s in her front foyer room .
Of course, yearly , we go over her At Home expenses for Tax Planning. In IRS land, there are over 22 items that her office could be eligible for. I’ll just simply mention 12 below.
- Rent
- Equipment
- Supplies
- Transportation
- Labor
- Advertising
- Phone
- Gas
- Electric
- Internet
- Cable
So let’s say ( numbers not real ) she made $100,000 at Essence & $100,000 in her book business
Her w-2 income is income recorded off her standard deduction, then she’s taxed.
Her self employed income is NOT taxed at the Gross it is at the NET !. Why? Because Joan has to deduct those expenses. Let’s say her total expenses were $40,000. Don’t forget her 25% measurement which makes the expenses $10,000. Assume the standard deduction is $15,000 & her Federal State & City tax bracket is a combined 40%.
Essence Magazine
Gross Income. $100,000
Standard deduction $15,000
Adjusted Gross $85,000
Federal, State City Tax bracket 40%
Tax Due for year $34,000
Joan Morgan , Inc
Gross Income $90,000
Standard deduction $15,000
Adjusted Gross $75,000
Fed State City tax 40%
Tax due for year $30,000
Joan saved $4,000 in taxes by having NET income of $90,000 !!!
Now if you wanted to get ” investment return cute” think about it: She made a $4,000 profit, divide that from the original tax due, the $34k, you just made a 11.7% return. Just to get even cuter, who guarantees that return; good bookkeeping & The IRS law. I can’t think of an investment today that can do that! Do you?
But to get back to taxation, tax planning, at home expenses , and life.
Yes , today one should consider , especially in these COVID times their passion , and couple that with virtual opportunity and a self employed platform . What should you offer? Thats up to your passion! Because that’s will get you through the ups and downs. How do we know? The Financial Advisors Group & Rivieccio Financial Advisors have been in existence since 1997, as self employed operations.
We covered this At Home Expenses , lesson & lecture on our most recent episode on Financial Focus University, hosted by The New York Parrot media company on Facebook & You Tube ( you can find this episode below).
So citizens of America, we can blame ( rightly) The Donald Trump Administration for taking away our ” job expenses ” as tax deductible, or , you can look at this, especially in our new COVID normality, as an opportunity to explore a passion, become self employed, make additional and save on taxes.
For Self employed people , first , Congratulations, second, hope this helps. For Corporate America workers, call your Congressperson. Maybe you should have job expenses back on the IRS side !?.
Professor Anthony Rivieccio, MBA PFA, is the founder of The Financial Advisors Group, celebrating its 25th year as a full service investment planning & management firm . Anthony is also owner of Rivieccio Financial Advisors, a virtual only financial planning & advisory firm, opened in 2021.
Mr. Rivieccio, a recognized financial expert since 1986, has been featured by many national and local media including: Kiplinger’s Personal Finance, The New York Post, News 12 The Bronx, Bloomberg News Radio, BronxNet Television, the Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Co-Op City News, The New York Parrot, The Bronx News, thisisthebronX.info , The Bronx Chronicle & The Parkchester Times. Mr. Rivieccio also pens a financial article called “Money Talk”.
Anthony is also currently an Adjunct Professor of Business, Finance & Accounting for both, City University of New York & Monroe College, a Private University.
For financial assistance, Anthony can be reached at (347) 575-5045. Have Facebook? My email is a_rivieccio@yahoo.com My personal page is www.facebook.com/anthonyfromthebronx
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