Tax info if you currently deduct for a home office... - Posted by chris

Posted by chris on May 28, 2000 at 22:13:52:

I got this in my inbox from a tax Q&A newsletter and thought it might be useful to you folks figuring out incorporation ideas for your biz:

I’ve built a successful home business.
I’d like to incorporate it as an S corporation, but my
accountant says I’ll lose my home office deduction. Why
would I lose the deduction if I’m still working from home?

Answer from tax attorney Barbara Weltman… You’d lose
the home office deduction as a result of the change
from being self-employed to being an owner-employee of
an S corporation. While the corporation could deduct the
rent it pays to you, you’d have to report the income on
your personal return and could not claim any offsetting
deductions for maintenance and depreciation.

However, you may save business deductions for your home
office expenses by creating an “accountable plan” under
Code Section 62©. This could let your corporation
reimburse you for business expenses – such as those of
an office – that you pay on its behalf. It can then
deduct the reimbursement. Consult your tax adviser
for full details.