Making More Money While Spending Less Making More Money While Spending Less

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Making More Money While Spending Less

After carefully evaluating my financial situation, I could tell that some things needed to change. It seemed like I was constantly letting my checking account run dry, and it was really frustrating for me. I wanted to live without constantly worrying about finances, so I took a good hard look at how I was spending my money. That simple decision completely changed my life. Within about three months, I finally felt like I had a handle on things. This blog is all about making more money while spending less, and learning the budgeting skills you need to have a better life.

Changes to Your Home Office Deduction For The 2018 Tax Year

As the holiday season approaches, the 2018 tax year is rapidly coming to a close. If you want to take steps to improve your tax situation and reduce your tax liability when you file your return for the 2018 tax year, take action now. Though the Tax Cuts and Jobs Act (TCJA) passed in December of 2017, the 2018 tax year is the first time it will really affect your tax return. 

If you have a home office, you may want to purchase new equipment for your office or buy new pieces to make the spot more functional. However, before you start renovating your workspace, make sure that you understand the implications of TCJA on your home office deduction. 

Effects of the TCJA on Non-Self-Employed Taxpayers

The TCJA effectively removes the home office deduction for individuals who are not self-employed while preserving the home office deduction for taxpayers who classify themselves as self-employed.

In previous tax years, taxpayers who worked for companies were able to utilize the home office deduction if the home office was for the employer's convenience (not the employee's) and if the space served as the worker's primary spot for conducting business. To claim the home office deduction, these non-self-employed taxpayers had to fill out Schedule A when they filed their taxes.

Schedule A was used for a variety of miscellaneous expenses, including home office expenses. Taxpayers were then able to deduct the expenses that exceeded two percent of their gross income. The TCJA eliminated the ability to deduct these miscellaneous expenses. 

If you used Schedule A to claim home office expenses in the past, take a moment to sit down with a tax service, such as Balkcom Pearsall & Parrish CPA's PA, and see how the elimination of this deduction will affect your tax bill. Should the removal of the home office deduction raise your tax bill, you can increase your withholding from your paychecks to make sure that you withhold enough money to cover your tax obligation. 

Ramifications of the TCJA for Self-Employed Taxpayers

The TCJA has minimal change on the home office deduction for self-employed taxpayers. These taxpayers retain the ability to use expenses and purchases for their home office to reduce the amount of their taxable income.

Just make sure that the space you use is a dedicated home office and that you prorate expenses that benefit your entire home, such as utility expenses or the cost of your monthly interest service. Save any receipts for equipment that you buy for the office.