If you use a part of your home for business, you could reduce your tax bill by deducting a portion of your rent or mortgage interests, utilities, insurance, and other home expense.  However, it’s important to understand the rules so that you don’t raise red flags with the IRS.  In this post, I will  explain the rules for taking a home-office deduction and how to use it to save money

This business, a Texas manufacturer, came to me after they had hired another accounting firm to defend their tax audit. After about a year working with this firm, they received an initial audit assessment of approximately $235,000 plus interest and penalties. The business wanted me to review the audit assessment and provide a second opinion. 

The new section 199A created by the Tax Cuts and Jobs Act allows many pass-through business owners to deduct up to 20% of their qualified business income (QBI).  Section 199A went into effect after December 2017, meaning you can claim it for the first time on your 2018 income tax return (form 1040) regardless of whether you take itemized or standard deductions.  Given this section is both complex and new, maximizing the tax deduction will require careful planning.  

Let‘s get into the detail.

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