How to Disagree Courteously
If you’ve ever been in a situation where you’re asked for a “second opinion” on someone else’s business or tax strategy, you know how uncomfortable it can be - especially if you think the advice they’ve been given was incorrect. Finding a way to present an alternative with courtesy can be a delicate task!
I found myself in that position this past weekend. I was staying with some friends who just started a new business. We were talking about new tax developments for business owners, and wound up talking about the home office deduction. Even though their home office literally takes up about 10% of their home’s square footage, they had been advised not to take it. Their tax advisor felt that they had enough deductions that they didn’t need the home office, and that it wasn’t worth take the depreciation deduction, when it would have to be recaptured upon a later sale.
There are times when that makes sense … but I didn’t think this was one of them. You see, these people also travel about 80 miles a day, each day, to and from their business office. And, while your first commute of the day isn’t deductible, when you have a home office, that commute can be you walking down the hall with a cup of coffee to check email and make a few calls before heading in (something I do every day!). After that, the drive (and most other outside trips) do become deductible. By establishing a home office, they will be able to write off that 80 mile commute. At the current rate of 58.5 cents per mile, they’ll have a company deduction of about $235/week, which isn’t considered taxable income to them.
We did the math and they were surprised at how quickly that deduction grew. This year, they will definitely be taking the deduction. After all, it’s going to put a nice sum of money directly into their pockets!
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The home office deduction is such a misunderstood one! People still think it’s a red flag even though the law changed in 1997. That’s ELEVEN YEARS ago!
And in this case, who wouldn’t want to pick up $235/week in income.
Good for you, Megan, in sticking by your guns and helping your friends.
I take a home office deduction but then I forget to keep track of mileage when I use my vehicle for business purposes. Who ever made up that saying that it’s hard to teach and old dog new tricks.
Mark Nelson financialhat.com
The biggest issue their tax preparer had was the depreciation deduction on the home office. Because that amount needs to be recaptured on a later sale, she didn’t think it was worth taking the deduction.
I don’t understand the logic: the depreciation deduction isn’t the ONLY reason to take a home office deduction! What about the percentage of lights, heat, lawn care, pool care, driveway maintenance, exterior maintenance, utility costs, etc., etc., that you can attribute to the business? Every dollar you move from a 35% after-tax personal expense to a pre-tax business expense puts money in your pocket, even if you don’t make a dime more in profits!
Me, I would have suggested that they simply don’t take the depreciation portion if it’s an issue … but take the rest, for heaven’s sake!
Mark, my suggestion is to keep track of your mileage consistently for two months. Make sure those months are representative of the rest of the year. For example, you don’t want to make that the time period when you do your annual cross country business trek.
Once you have a couple of months of records, you can extrapolate the rest.