As a painting business owner, you likely conduct most of your business outside of your home (doing estimates, supervising job sites, etc). However, you can still claim the home office deduction if you are using an area in your home for your business. Claiming this deduction allows you to deduct a percentage of utilities, mortgage interest, home insurance, and property taxes on Form 8829. This can easily save you hundreds of dollars in a single tax year. However, you must ensure you are following the IRS guidelines in case of an audit.
Determine Eligibility for Home Office Deduction
To determine your eligibility for the home office deduction, ask yourself if your home office (or work area) is used EXCLUSIVELY AND REGULARLY for your painting business. Exclusively means you only use the area for working on your painting business. Some people make the mistake of using their home office for an another purpose, preventing them from taking the home office deduction. To meet the regular use requirement, using the home office at least bi-weekly should suffice. Note: your “home office” does not have to be an entire room. It can be just a corner of a room. This may help you designate a place for exclusive use for your business to meet the exclusive use test.
The next requirement your home office must meet is the “principal place of business” test. Most likely, as a painting business owner, you will be on job sites for a considerable amount of time. However, the IRS gives a provision, allowing an individual to meet the “principal place of business” test if the individual uses the office for administrative or management activities. As a painting business owner, you’ll likely be doing the following types of tasks in your home office which will help you meet this test: entering payroll, ordering supplies, completing estimates for clients, job-site planning, and scheduling appointments.
Calculating Home Office Deduction
Now that you have determined you are eligible for the home office deduction, you can make the calculation and complete the necessary form. If you do your own taxes you can use Form 8829 and the Instructions for Form 8829 to do this. If you have a tax preparer or CPA take care of it, ensure they have the following information to calculate the deduction:
1. Square footage of your home and your home office.
2. Total mortgage interest.
3. Total real estate taxes.
4. Home insurance.
5. Repairs and maintenance.
6. Utility costs.
Many painting contractors fail to take this deduction, which is unfortunate. Some are unaware of the deduction and others believe the are not allowed. This is not the case! Just ensure you follow the guidelines I’ve set out. If you would like to learn more tax tips for painting contractors, make sure you get my free report for painting contractors.
3 thoughts on “Painting Business Owner: Home Office Tax Deduction”
Can you recommend a good payroll service near Marshfield , Ma? What would be involved if I tried to do it myself?
Phil, I do not know a local payroll service provider in Marshfield, MA. However, Paychex and ADP are good national payroll providers that could assist you. If you wanted to do payroll yourself, your best solution would likely be Quickbooks Online Payroll. If you already use Quickbooks Online for your bookkeeping software, you are halfway there. All you need to do is sign up for QBO Enhanced or QBO Full Service payroll. From there, you would add employee information and enter hours. QBO would take care of the tax filings. If this doesn’t make sense for your situation, feel free to schedule a quick meeting to discuss your options: http://bookkeepingforpainters.com/request-consultation/
Hello Daniel, nice post to share. Thank you so much for sharing this painting information. We are thankful to you for your hard work. keep it up in the future as well.