Search Results for: home office

Do You Qualify for the Home Office Deduction?

October 16, 2020 by Nick Magone, CPA, CGMA, CFP®

Aside from saving on time, gas and dry cleaning, working from home can potentially deliver some attractive tax advantages. If you qualify for the home office deduction, you can deduct all direct expenses and part of your indirect expenses involved in working from home.

Does your home office fit the bill?

Your home office could be a room in your home, a portion of a room in your home, or a separate building next to your home that you use to conduct business activities. To qualify for the deduction — and avoid the tax filing mistakes that can land you in hot water — that part of your home must be one of the following:

Your principal place of business.This requires you to show that you use part of your home exclusively and regularly as the principal place of business for your trade or business.
A place where you meet clients, customers or patients.Your home office may qualify if you use it exclusively and regularly to meet with clients, customers or patients in the normal course of your trade or business. Note: If you set aside a room in your home as your home office and you also use the room as a guest bedroom or den, then you won’t meet the “exclusive use” test.
A separate, unattached structure used in connection with your trade or business.A shed or unattached garage might qualify for the home office deduction if it’s a place that you use regularly and exclusively in connection with your trade or business.
A place where you store inventory or product samples.You must use the space on a regular basis (but not necessarily exclusively) for the storage of inventory or product samples used in your trade or business of selling products at retail or wholesale.

Keep in mind, you must now file a Schedule C on Form 1040 to be eligible for the home office deduction.

Contact the experts

If you prefer not to keep track of your home office expenses, there’s a simplified method that allows qualifying taxpayers to deduct $5 for each square foot of office space, up to a maximum of 300 square feet. Call Magone & Company today at (973) 301-2300 to learn how we can help ensure that you’re not overpaying your taxes for your qualified home office.

How Owning a Home Can Pay Off at Tax Time

April 12, 2024 by Nick Magone, CPA, CGMA, CFP®

From building equity to growing roots in a community, home ownership has some significant benefits — including some hefty tax savings.

Uncle Sam offers homeowners several tax advantages to help ease the financial burden of your costly investment. If you’re thinking of moving into a new home or just settling into your dream home, homeownership not only provides a place to call your own. It also can offer some valuable savings along the way.

Discount points. Considering a home purchase? If you plan to stay in the home for at least 10 years, buying mortgage points — or discount points — may be worth your while.

Each mortgage point represents one percent of your underlying loan amount. While they’re an additional upfront cost at closing, they’re also a way to negotiate a lower interest rate. Plus, they’re deductible.

Mortgage interest deduction. As a homeowner, you can deduct the interest you pay on your mortgage loan from your taxable income. This deduction can result in substantial savings, especially during the early years of your mortgage when the interest portion of your monthly payment is typically higher.

For example, if you purchased a home with a mortgage loan of $300,000 and an interest rate of 4%, you would pay approximately $12,000 in interest during the first year. By deducting this amount, you could potentially lower your tax liability by thousands of dollars.

Property tax deduction. Property taxes are calculated by the local government and are typically based on the assessed value of your home. The good news is that you can deduct the amount you pay in property taxes from your taxable income, reducing your overall tax liability.

This deduction is particularly beneficial for homeowners who live in areas with high property tax rates.

Home office deduction. If you use a portion of your home exclusively for business purposes, you may be eligible for the home office deduction. This allows you to deduct all direct expenses and part of your indirect expenses involved in working from home, including utilities, insurance and repairs.

Keep in mind, this deduction is calculated based on the percentage of your home that is used for business purposes. So if your home office occupies 10% of your total square footage, you can deduct 10% of your eligible expenses.

Home equity loan interest. A home equity loan allows you to access the equity you’ve built in your home and borrow the funds as needed. You can typically borrow 80-85% of your total home equity.

Similar to regular mortgage interest, you can deduct the interest you’ve paid — as long as the funds were spent on making home improvements.

Medically necessary home improvements. And speaking of home improvements, medically necessary home improvements that help you, your spouse or dependents live safely in the home may be deductible. These include widening doorways, lowering cabinets, adding railings and more.

Time to take advantage of homeownership tax benefits

There are few times in life you can get money out of your house — rather than pouring cash into it. Tax season is a key opportunity! At Magone & Company, we’ll help you get the most tax savings as a homeowner. For tax planning guidance, give us a call today at (973) 301-2300.

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your tax situation.

Return to the Office: Managing Employee Pushback on In-person Work

October 15, 2021 by Nick Magone, CPA, CGMA, CFP®

The pandemic fueled a massive work-from-home trend that many non-essential businesses have maintained for the past 18 months or more. But despite the current surge in COVID-19 cases, more and more employers are asking employees to return — causing a fair share of anxiety and fear, especially among the unvaccinated. As employers receive pushback from their teams, what can be done to ease employee comfort and peace of mind around colleagues, customers and clients after an extended hiatus?

A heavy-handed request?

With the FDA fully approving the vaccine beyond emergency use, employers may increasingly be making vaccination a requirement for returning to the office.

As an employer, you have options up to and including termination (in some circumstances) if employees refuse to return to the office or get vaccinated. But will on-site work directly impact or negate your success?

Here are some potential reasons to reconsider a blanket return-or-quit policy.

Employees may be genuinely reluctant for legitimate health reasons.
It may cause more stress for employees whose lives have already been turned upside down by COVID-19.
You risk damaging morale across the workforce.
You may have wrongly assessed the legal risks of doing so.
It might be harder than expected to recruit replacements for terminated employees.

The first step in formulating a return-to-work strategy is uncovering why your employees are reluctant to stop working from home. Consider conducting a survey, but avoid giving the impression that simply preferring to work at home is a compelling enough reason to allow it.

Coaxing tips

Reassuring employees of your commitment to maintaining a safe environment may help alleviate concerns. Here are some tips to help them get on board:

Give a generous heads up. Set the onsite work deadline a month or two into the future to give employees time to adjust and plan head.
Have a conversation. If feasible, have one-on-one conversations with employees who express worry about returning to work. They’re more likely to come around if they know you respect their concerns and want to understand them. A reasonable compromise might emerge.
Educate, educate, educate. Inform employees about the Centers for Disease Control and Prevention (CDC) workplace safety standards and the scientific basis for those practices, as well as your compliance practices.
Enact a policy phase-in period. Instead of setting an all-or-nothing date of return, allow employees to slowly acclimate. You may ask them to return for one or two days a week initially, adding more days over time.
Be flexible and fair. Cutting deals with individual employees may create resentment from others. While doing your best to accommodate individual needs, it’s important to ensure that your practices are reasonable for everyone.

Help from Uncle Sam

If you’re considering a mandatory vaccination policy to accompany your return-to-work policy, you may consider incentivizing hesitant employees to get their jab.

One possible solution is to offer paid time off for COVID-19 vaccine appointments. Some employers take this a step further, offering a financial bonus on top of regular pay.

A little compassion goes a long way

No matter how you approach the task at hand, be aware of the many health conditions that may make people more vulnerable to contracting or having an acute case of COVID-19. The CDC’s list includes cancer, chronic kidney disease, COPD, heart conditions, obesity, pregnancy, smoking and diabetes. And some employees with these conditions might worry about COVID-19-related health risks at the workplace, even if they’ve been vaccinated.

In all cases, be sure to review how federal, state and local statutes may impact the approaches you can take.

Self-Employment Tax Planning: Start Now or Pay Later

January 2, 2026 by Nick Magone, CPA, CGMA, CFP®

Working for yourself can be great, but it can also be quite… taxing.

Being your own boss comes with incredible perks — like working where you want and when you want — but the tax side of things can be a bit more complex than when you had an employer handling everything.

To help avoid any unpleasant tax surprises, here are some key rules to keep you in good standing with the IRS.

You have to report income and expenses on Schedule C of Form 1040. As a self-employed worker, you’ll wind up owing taxes on your net profit.

The upside? Your business expenses get deducted against your gross income and not as itemized deductions. And if you have a bad year and lose money, you can usually deduct those losses against your other income.

You’ll have to pay self-employment taxes. For 2025, you’ll pay 15.3% on your first $176,100 of net earnings, then 2.9% on anything above that.

If you’re a high earner, you’ll pay an extra 0.9% Medicare tax once you hit $200,000 if filing individually or $250,000 if married filing jointly. The silver lining? You can deduct half of what you pay in self-employment tax.

You might qualify for a pass-through deduction. If your business generates qualified business income, you may be able to deduct up to 20% of it.

The pass-through deduction is applied after most of your other deductions, meaning it reduces your final taxable income. The good news is you can claim it whether you itemize your deductions or take the standard deduction.

Your home office expenses may be deductible. Working from your home? Your home office can be a dedicated room, part of a room or even a separate building on your property that’s used to conduct business.

You may quality for the home office deduction on all direct expenses, as well as part of your indirect expenses that are related to working from home.

You’re responsible for quarterly estimated tax payments. Since no employer is withholding taxes from your income, you’re on the hook for paying the IRS four times a year.

You can deduct your health insurance premiums as a business expense. This means you get to deduct 100% of your premiums, compared to the regular medical expense deduction that only kicks in after you’ve spent over 7.5% of your income on medical costs.

You must maintain complete records of your income and expenses. In order to claim the full amount of deductions you’re entitled to receive, be sure to keep careful documentation of your expenses.

Be aware that some expenses — like car costs, travel and meals — come with extra rules and recordkeeping requirements or limitations on deductibility.

You may consider setting up a retirement plan. This can be a great tax savings strategy, allowing you to deduct what you contribute now and only pay taxes when you withdraw the money later.

Look into retirement plan option like a SIMPLE plan or SEP IRA, which require less paperwork but still offer solid tax benefits. In 2025, business owners may contribute up to 25% of their total earnings or a maximum of $70,000 into their SEP IRA.

You’ll need to handle payroll taxes for your employees. Hiring a team to work for you? That means getting a taxpayer ID number and dealing with withholding, adding a whole new layer of administrative responsibility to your business.

Questions? The CPAs at Magone & Company can help support you in achieving the most favorable tax situation as a self-employed worker or small business owner. Give us a call at (973) 301-2300 to learn more.

Maximizing the Tax Benefits of Your Remote Workforce

October 24, 2025 by Nick Magone, CPA, CGMA, CFP®

The pandemic fundamentally altered how many U.S. businesses operate. Distributed teams and flexible arrangements have become permanent fixtures rather than temporary fixes.

For employers and workers, this also means new opportunities and challenges for tax planning and compliance.

The reality of remote workers

Companies have discovered that productivity doesn’t require physical proximity. In fact, 60% of remote workers report their flexible work arrangement has boosted their ability to get work done and meet deadlines. This proven effectiveness means that today’s employers may have teams spanning cities and states, creating complex tax implications that extend beyond traditional office-based considerations.

Comprehensive tax credit and incentive (TC&I) analysis has become essential for businesses supporting remote teams. These specialized programs provide detailed assessments of available opportunities, breaking down qualification requirements and implementation strategies tailored to your specific business model.

TC&I experts examine your operations, identifying federal, state and local programs that align with your workforce distribution, ensuring you’re capturing every available benefit while maintaining full compliance across all jurisdictions where your employees work.

Navigating the nexus challenge

Before your businesses can capitalize on these opportunities, you must establish and manage nexus obligations.

State tax nexus determines where your business has sufficient connection to warrant tax obligations, and remote employees can create these connections in states where you’ve never maintained a physical presence.

Each state has different standards for establishing nexus through employee activities. Some require minimal employee presence to trigger obligations, while others have higher thresholds. Getting nexus right requires a proactive approach:

Conduct regular nexus assessments. Implement regular reviews of employee locations and activities to identify new potential nexus obligations before they become compliance issues.
Establish clear remote work policies. Develop guidelines that address tax implications of employee relocations and temporary work arrangements.
Engage multi-state tax professionals. Partner with specialists who understand the nuanced requirements across different jurisdictions.

Credits that reward a remote work strategy

Once your nexus obligations are properly managed, the evolving work landscape has expanded access to numerous tax credit opportunities for remote employers. For example:

State-specific remote work incentives. Various states offer credits for companies hiring remote workers or relocating operations.
Home office deduction optimization. While limited for employees, businesses can structure arrangements to maximize legitimate office-related deductions.
Technology investment credits. Many jurisdictions offer incentives for investments in equipment and software that enable remote collaboration.
Economic development incentives. Location-specific credits may be available when remote workers are based in designated economic zones.

Making the most of your remote workforce

Regular assessment of your workforce distribution, combined with strategic implementation of available credit programs, positions your business to thrive. Learn how the experts at Magone & Co can help. Reach out or give us a call today at (973) 301-2300.

The New Tax Audit Landscape: Protecting Your Financial Future

May 23, 2025 by Nick Magone, CPA, CGMA, CFP®

With advanced technologies and stricter compliance standards, tax audits are evolving. And as a result, they’re transforming how individuals and businesses approach their financial reporting.

Navigating today’s audit landscape requires vigilance and strategic planning. Here are five risk factors — and mitigation tips — to plan for:

High-income earners
Complex financial portfolios present more opportunities for potential tax discrepancies. That’s why tax authorities are focusing on high-income earners.

To combat this trigger, impacted individuals may consider:

Implementing a multi-layered verification process for all income
Creating a robust digital filing system for financial records, including back-up copies of all critical financial documents
Collaborating with tax professionals that specialize in high-net-worth financial management

Tax return errors
From simple miscalculations to complex reporting mistakes, the IRS is zeroing in to reduce errors and close tax gaps. The most common errors include incorrect Social Security numbers, mismatched names, math mistakes and inconsistent income reporting across different forms.

Critical prevention strategies include:

Using official IRS forms and publications as reference
Maintaining updated records and accurate personal information
Addressing income or deduction inconsistencies quickly and proactively

Cryptocurrency transactions

Cryptocurrency and digital assets have created a challenging regulatory environment. As a result, the IRS is developing increasingly sophisticated mechanisms to track and tax these transactions.

How you can you build a solid defense?

Documenting every cryptocurrency transaction meticulously
Keeping a detailed transaction log with corresponding market values
Staying updated on emerging digital asset tax laws and regulations

Uncommon business expenses

Unusual business expenses may appear suspicious when they lack clear business purpose or blur the line between personal and professional spending. Entertainment costs, vehicle expenses, home office deductions and travel expenditures frequently raise red flags.

By making strategic moves now, you can prove the legitimacy of these expenses if and when an audit arises:

Meticulously documenting every expense and save all receipts
Creating a clear narrative of business purpose for each expense
Making sure expenses are proportional to business income and being prepared to provide a comprehensive explanation if audited

Deductions

Sizeable deductions can increase your chances of an audit — especially in 2025. A careful deduction management strategy requires substantiating, categorizing and defending business and personal expenses:

Understanding industry-specific standards and maintaining a comprehensive and organized record-keeping system
Ensuring that every claimed expense has a legitimate, verifiable business connection
Segregating personal and business expenses through dedicated financial accounts, keeping detailed receipts with clear descriptions

If there’s something that makes the IRS take a second look, an audit may be inevitable.

By staying informed, you can transform potential audit stress into a proactive tax strategy. Don’t hesitate to reach out to the tax professionals at Magone & Company for guidance.