Tax Strategies for a Mobile Office
by BarbaraWeltman, Guest Blogger
- Created: October 11, 2011, 7:12 pm
- Updated: October 11, 2011, 7:16 pm
If Starbucks is your headquarters and you spend much or most of your time out and about, you may be part of a growing group of business owners who work on a mobile basis. A laptop, tablet, and Smartphone enable you to set up an office just about anywhere. Certainly, not having to pay office rent cuts your overhead substantially. Being mobile also gives you more flexibility in scheduling and running your business. But you still have costs for working on a mobile basis. Here are the tax rules you need to know.Home office deductionEven if you don’t spend all your time working from home, you may still qualify to treat a portion of your residence as a home office. This entitles you to deduct costs related to the home office, including rent (if you are a tenant), real estate taxes, mortgage interest, and depreciation (if you own your home), utilities, insurance, etc.To claim this deduction, your home office must be your “principal place of business.” Usually, this means the place where you earn your money. However, the tax law lets you treat your home office as your principal place of business if you use it to do substantial administrative activities and you have no other fixed location. Thus, if you use your home office to schedule appointments, keep your books, order supplies, do research, and do other business activities, the home office can qualify as your principal place of business.Caution: The space you call your home office must be used regularly and exclusively for business. Your kitchen won’t work as an office because you eat there.Home office deduction rules are explained in IRS Publication 587, Business Use of Your Home. Travel costsOnce you establish that your home office is your principal place of business, then any travel to and from the office for business purposes—to see a customer, prospect, or vendor, or go to an office supply company, the post office, or the bank—becomes a deductible business expense. If you use your personal car, truck, or van for business travel, you can write off the business portion of vehicle usage in one of two ways:
- Deduct your actual costs;
- Deduct business mileage based on an IRS-set rate. For 2011, the rate is 51¢ per mile for the first half of the year and 55.5¢ per mile for the second half of the year.
Either way, you can also deduct your parking and tolls. However, to claim any deduction you must keep a good record of your business driving. For each trip, note the mileage (odometer reading), the date, destination, and purpose of the trip.Rules for deducting your vehicle expenses are explained in IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses. Technology costsUsually, you have to depreciate the cost of any item that is expected to last for more than one year. However, two tax rules in 2011—the Section 179 deduction (first-year expensing) and 100% bonus depreciation—effectively allow you to write off the cost of a technology item purchased this year.Laptops and tablets. The cost can be written off in the year you buy the item and place it in service (i.e., start to use it for business). Rules on writing off such items are explained in IRS Publication 946, How to Depreciate Property.Smartphones. Monthly service fees are fully deductible. As long as you use the phone primarily for business, then any personal use can be ignored for deduction purposes.Apps. While many apps are free, you may want to buy certain apps to help you work on a mobile basis. For example, you may need an app to process payments on the fly, such as *Square (2.75% per swipe for all major credit cards), *PAYware Mobile (the encryption sleeve costs $149 and there are transaction fees), or Intuit’s *GoPayment (the card reader costs $179.95 and there is a monthly service fee of $12.95). Monthly fees are currently deductible. The cost of buying a device is treated the same as buying any other hardware, explained earlier.Final wordWork with a knowledgeable tax advisor to make sure you’re getting all the deductions you’re entitled to. While you’re pounding away at your laptop at Starbucks, you can’t deduct your latte! * Denotes a nongovernment Website.
About the Author
Barbara Weltman is an attorney, prolific author with such titles as J.K. Lasser's Small Business Taxes, J.K. Lasser's Guide to Self-Employment, and Smooth Failing as well as a trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day® and monthly e-newsletter Big Ideas for Small Business® and host of Build Your Business Radio. She has been included in the List of 100 Small Business Influencers for three years in a row. Follow her on Twitter: @BarbaraWeltman.
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