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The Rodman
Report
January
2008 | |
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Happy New Year everyone!
Last month's issue contained several ideas for
making your tax return work for you and leaving more
money in your pocket. We're not done yet! If
you are self-employed and work from home, "Home
Office Expense Deduction for Self-Employed
Taxpayers" has some ideas for
maximizing your home office deductions. Our
article "Higher Education Expense Deduction"
guides you through the rules for claiming
a deduction for the cost of tuition and fees to enroll
or attend college or graduate school even if the
education isn't employment or business-related. Also,
Jen Reading, our Director of Administrative
Services has some thoughts for employers about
establishing a mentoring program in
their business.
Please enjoy your January edition of The
Rodman
Report! | |
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Home Office Deduction for Self-Employed
Taxpayers
The Basics Of A Valuable
Deduction For Those Who
Qualify |
If
you're self-employed and work out of an office in your
home, and if you satisfy the strict rules that govern
those deductions (discussed below), you will be entitled
to favorable "home office" deductions - that is,
above-the-line business expense deductions for the
following:
- the "direct expenses" of the home office - e.g.,
the costs of painting or repairing the home office,
depreciation deductions for furniture and fixtures
used in the home office, etc; and
- the "indirect" expenses of maintaining the home
office - e.g., the properly allocable share of utility
costs, depreciation, insurance, etc., for your home,
as well as an allocable share of mortgage interest,
real estate taxes, and casualty losses.
In addition, if your home office is your
"principal place of business" under the
rules discussed below, the costs of travelling between
your home office and other work locations in that
business are deductible transportation expenses, rather
than nondeductible commuting costs. And you may
also deduct the cost of computers and related equipment
that you use in the home office, without being subject
to the "listed property" restrictions that would
otherwise apply.
Tests for home office
deductions. You may deduct your home
office expenses if you meet any of the three tests
described below: the principal place of business test,
the place for meeting patients, clients or customers
test, or the separate structure test. You may also
deduct the expenses of certain storage space if you
qualify under the rules described further below.
Principal place of
business. You're entitled to home
office deductions if you use your home office,
exclusively and on a regular basis, as your principal
place of business. (What "exclusively and on a
regular basis" means is not entirely self-evident.
We can help you figure out whether your home office
satisfies this make-or-break requirement.) Your
home is your principal place of business if it satisfies
either a "management or administrative activities" test,
or a "relative importance" test. You satisfy the
management or administrative activities test if you use
your home office for administrative or management
activities of your business, and if you meet certain
other requirements. You meet the relative
importance test if your home office is the most
important place where you conduct your business, in
comparison with all the other locations where you
conduct that business.
Home office used for meeting patients,
clients, or customers. You're
entitled to home office deductions if you use your home
office, exclusively and on a regular basis, to meet or
deal with patients, clients, or customers. The
patients, clients or customers must be physically
present in the home office.
Separate structures.
You're entitled to home office deductions for a
home office, used exclusively and on a regular basis for
business, that's located in a separate unattached
structure on the same property as your home - for
example, an unattached garage, artist's studio,
workshop, or office building.
Space for storing inventory or product
samples. If you're in the business
of selling products at retail or wholesale, and if your
home is your sole fixed business location, you can
deduct home expenses allocable to space that you use
regularly (but not necessarily exclusively) to store
inventory or product samples.
Amount limitations on home office
deductions. The amount of your home
office deductions is subject to limitations based on the
income attributable to your use of the home office, your
residence-based deductions that aren't dependent on use
of your home for business (e.g., mortgage interest and
real estate taxes), and your business deductions that
aren't attributable to your use of the home
office. But any home office expenses that can't be
deducted because of these limitations may be carried
over and deducted in later years. Rodman &
Rodman can help you figure out how these limitations
affect your home office deductions.
Sales of homes with home
offices. If you sell -at a profit- a home
that contains, or contained, a home office, the
otherwise available $250,000/$500,000 exclusion for gain
on the sale of a principal residence won't apply to the
portion of your profit equal to the amount of
depreciation you claimed on the home office. In
addition, the exclusion won't apply to the portion
allocable to a home office that's separate from the
dwelling unit. Otherwise, the home office won't
affect your eligibility for the exclusion.
We can help. Proper planning
can be the key to nailing down the optimum tax treatment
for your office at home expenses. We are prepared
to assist you with advice about any of the issues
discussed above. Please call Rodman &
Rodman at 617-965-5959 if you would like to discuss
these (or any other) matters.
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Higher
Education Expense
Deduction |
 You may be able to claim a
deduction for the cost of tuition and fees to enroll or
attend college or graduate school for yourself, your
spouse, or your dependents, even if the education isn't
employment or business-related.
A married couple filing jointly can deduct up to
$4,000 annually of qualifying expenses (defined below)
if their adjusted gross income (AGI), with certain
modifications, doesn't exceed $130,000 for the year
($65,000 for unmarried taxpayers). If modified AGI
is above $130,000 ($65,000 for unmarrieds) but not above
$160,000 ($80,000 for unmarrieds), up to $2,000 of
qualifying expenses will be deductible. No
deduction will be allowed if modified AGI exceeds
$160,000 ($80,000 for unmarrieds). Married
taxpayers must file jointly to claim the credit; it
isn't available for married taxpayers filing
separately.
Qualifying expenses are essentially those
for tuition and enrollment - or attendance-related fees,
but not for the cost of books, room and board, student
activity fees, athletic fees, insurance, transportation
costs, or other personal expenses. To
qualify, the expense must be in connection with
enrollment during the year for which the deduction is
claimed, or in connection with an academic term
beginning within the first three months of the following
year.
The deduction will be "above the line" - i.e., it
will be taken in arriving at AGI, will therefore be
available even if you don't itemize, and won't be
subject to reduction the way itemized deductions
are. And, it will be allowed for alternative
minimum tax (AMT) purposes.
A taxpayer who can be claimed as a
dependent by someone else cannot qualify to claim this
deduction. Thus, for example, in the case of a
dependent child attending college, the parent's expenses
for the child can qualify under these rules, but not any
expense the child pays for himself or
herself. If you're claiming a deduction
for expenses incurred on behalf of another individual,
that individual's name and social security number must
be included on your return.
The deduction isn't available for expenses
incurred for an individual if the Hope or Lifetime
Learning credit is claimed with respect to that
individual for the year. Further, in
determining the amount of expenses qualifying for the
deduction, amounts received for certain scholarships and
other tax-free educational assistance payments are
subtracted. Qualifying expenses may also have to
be reduced by expenses taken into account to determine
amounts excludible from income on interest from U.S.
savings bonds used for higher education expenses, and on
distributions from qualified tuition programs (also
known as 529 plans) or Coverdell education savings
accounts (also known as Coverdell ESAs). Thus, in
some cases, you may have to compare tax savings
available to you from several different tax benefits to
determine which is the best one to use.
Please also note that the deduction for higher
education expenses expired as of December 31, 2007.
However, it is probable, as was the case in prior years
when it previously expired, that the deduction will be
extended for 2008. We will keep you informed of any
developments as they occur.
For specific details on these rules, or, if you're
interested in general information on any of the various
other education-related tax benefits, please give Rodman
& Rodman a call. |
Establish A
Mentoring Program For Employees
Increased productivity
and retention will
result by
Jen Reading, Director of Administrative
Services |
One of the
most effective tools for increasing employee engagement
and productivity is a mentoring program. If you do not
currently have a mentoring program in place, a formal or
an informal program, you should seriously consider
launching one in 2008. Mentoring programs benefit not
only your employees, who will have the opportunity of
working one-on-one with an experienced team member, but
your company as well, through increased productivity and
employee retention. Here are three basic steps to aid in
developing your own mentoring program:
Determine your
objectives. It is important to make sure you have
clarified the specific goals you want to accomplish by
establishing a mentoring program. Furthermore, it is
imperative to align those goals and the procedures of
the program with your company's strategic business
plan.
Identify and
educate mentors. You should establish selection
criteria for choosing mentors, which can be based
on factors such as length of service, experience, level
in the company, educational background, etc. Once the
criteria is established, make sure that the mentors
are more than willing to participate in the program.
Provide the mentors with tools and training to help them
fulfill their role.
Communicate the
program to your company. In order for a mentoring
program to be successful, there must be buy-in on a
company-wide basis. The rest of your company needs to
understand the purpose and procedures of the program as
well as the benefits. Some ways to announce the program
are through orientation meetings, company newsletters
and/or email blasts.
Implementing
a mentoring program is certainly a challenge and
requires a lot of upfront work and planning. If the
program is successful, it can show your employees that
you are committed to their learning and development.
Monitoring and periodically assessing the program can
add to its success.
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| Rodman Fall Seminar Series A
Success |
We would like to thank all who attended any
of the Rodman & Rodman seminars that were held
over the Fall. Our seminars covered a number of
interesting subjects including Surviving The
Cost of College, Understanding and Analyzing Your
Financial Statements, Sales Development 101 and 16 Ways
To Improve The Value Of Your Business Prior To Selling.
We bring these free events to our clients and
friends in the hope that we can provide a forum where
experts in various areas of business and finance,
including those on our Team, can present
their timely information and superb advice.
We would also like to thank the
following presenters for taking time out of
their busy schedules to participate in the Fall Seminar
Series:
We encourage all of our clients and friends to
contact these fine professionals should they have a need
for their individual expertise. Please look for
announcements in future Rodman Reports for the details
about next years Fall Seminar
Series. | |
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Thank you for looking at The Rodman Report for
January. We hope you found some useful information. Look
for the next Rodman Report in February. Stay warm!
Best regards,
The Team at Rodman &
Rodman
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