"Oh My God Is Right", replies her brilliant and handsome father.
This is an example of two people saying the very same thing, but for entirely different reasons.
I can't help but wonder when I read other income tax and business articles if the writer has the same understanding of purpose that I hold so very dear.
When we go into business, the idea is to make money by fulfilling a dream.
If we are not in pursuit of profit, we are not in pursuit of a dream, and we don't have deductions against taxable income.
This my friends is how we play the game and I am about to explain what running a business is all about.
Let me assure you that economic benefit is first, followed by the art of practicing income tax to enhance our return on investment.
Income tax deductions can be a beautiful thing.
In order for a tax deduction to be beneficial, there must be some income.
Income is the spice of life and how we survive and thrive in a free market society.
When we first think of starting a home-based business (or any business for that matter), we are in hopes of providing goods or services that folks are willing to buy.
If and when we can master this very difficult task, we can think of the joys of revenue enhancement as it relates to income tax savings through planning.
When I think of the home office deduction, I am thinking of a profitable business that has thought long and hard in regards to its entity selection, its operations, and its plan for the future.
I know that I can use expenses that would otherwise not have been deductible and use them to reduce not only income tax exposure, but will reduce exposure to payroll taxes as well (please check out my audio CD at http://www.
com for the full picture on the home office deduction).
When others write of the home office deduction, it makes me wonder whether other issues have been taken into consideration.
Should the business be organized as a sole proprietorship to take advantage of this home office deduction? Would it have been better to incorporate and rent office space from our personal residence thus changing the way we record this transaction on our personal income tax returns? Does the person who has written the article have a good understanding of revenue procedure 2005-14, thus explaining how the sale of a principal residence, with business use of the property, is handled for income tax purposes? As an aside, the treatment of selling a principal residence with business use in the property can be quite favorable (audio CD for Home Office Deductions at http://www.
I think it is important to note here that the home office deduction is only of value when the business is profitable.
In a year where the business is at a loss, the home office deduction is not currently deductible but can be carried over for future use.
Remember the hobby rules when starting a new business venture and be sure that the business is seeking a profit.
The guideline to follow is 3 out of 5 years should be profitable (2 out of 7 years for businesses involving the horse trade) to keep the burden of proof on IRS regarding whether or not one is seeking a profit motive.
If this test is not met, it doesn't mean the jig is up, it just means that the burden switches to the taxpayer to determine profit motive.
I just can't help but wonder, when I say home office deduction, and some else says home office deduction, if we are actually both saying the same thing.
"Oh My God", I really do wonder.