Personal Finance

Guest

I posted this a few weeks ago, but got no response. So
I am trying again:

My wife is an ordained Presbyterian minister. Part of her
compensation includes a housing allowance, which is not
subject to income taxes. So our housing expenses have
already deducted from her income. We are still able to
deduct mortgage interest also; the IRS allows this double
deduction for clergy.

In 2005 I have been self-employed, using my home office as
my sole place of business.

We will file a joint return in April 2006.

May I take the home office deduction, given that our housing
expenses have already been deducted from my wife's income?

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Shyster1040 · Guest

As a technical matter, you could, but doing so would have
several collateral consequences, some of which would
probably be worse than simply not taking the deduction. The
IRS publications that would apply include Pub. 587 -
Business use of your home, and Pub. 517 (information for
ministers). They're available on the IRS' website at
www.irs.gov

The explanation, in very broad, general terms, should go as
follows:

you could take the home-office deduction, but

(1) you could no longer exclude from income that part of the
housing allowance that is allocable to the portion of the
house used as your office - meaning that you will have to
increase your gross income in order to take the deduction;

(2) the amount you could deduct would be limited to the
amount of income you derive from the business use of your
home-office, meaning that, in lean years, some of the
expenses might not be fully deductible. In that case, when
combined with (1), you would have a net increase in your
taxable income, and thus a higher tax liability;

(3) by increasing your gross income, you may also increase
your adjusted gross income (e.g., if some of your
home-office expenses are not deductible because you didn't
have enough income attributable to the use of that office),
in which case your miscellaneous itemized deductions will be
subject to a higher minimum threshhold before you can deduct
them - which just adds insult to injury since this increase
is caused (in part) by the disallowance of some of your
home-office expenses.

In sum, and without going into the details of your total tax
situation, it would seem that taking a home-office deduction
in your circumstances would not be a good idea; however, if
you really wanted to pursue the idea, you should discuss
your situation with a CPA or a tax attorney - that way you
get advice based on a full examination of the facts. What
I've said above is necessarily only in general and may not
apply to you (plus, since I didn't do extensive research on
it - hey, you get what you pay for - it's entirely possible
that there's something I'm missing).

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >>

Brew1 · Guest

revheck@linuxwaves.com wrote:

Shyster1040 · Guest

As a technical matter, you could, but doing so would have
several collateral consequences, some of which would
probably be worse than simply not taking the deduction. The
IRS publications that would apply include Pub. 587 -
Business use of your home, and Pub. 517 (information for
ministers). They're available on the IRS' website at
www.irs.gov

The explanation, in very broad, general terms, should go as
follows:

you could take the home-office deduction, but

(1) you could no longer exclude from income that part of the
housing allowance that is allocable to the portion of the
house used as your office - meaning that you will have to
increase your gross income in order to take the deduction;

(2) the amount you could deduct would be limited to the
amount of income you derive from the business use of your
home-office, meaning that, in lean years, some of the
expenses might not be fully deductible. In that case, when
combined with (1), you would have a net increase in your
taxable income, and thus a higher tax liability;

(3) by increasing your gross income, you may also increase
your adjusted gross income (e.g., if some of your
home-office expenses are not deductible because you didn't
have enough income attributable to the use of that office),
in which case your miscellaneous itemized deductions will be
subject to a higher minimum threshhold before you can deduct
them - which just adds insult to injury since this increase
is caused (in part) by the disallowance of some of your
home-office expenses.

In sum, and without going into the details of your total tax
situation, it would seem that taking a home-office deduction
in your circumstances would not be a good idea; however, if
you really wanted to pursue the idea, you should discuss
your situation with a CPA or a tax attorney - that way you
get advice based on a full examination of the facts. What
I've said above is necessarily only in general and may not
apply to you (plus, since I didn't do extensive research on
it - hey, you get what you pay for - it's entirely possible
that there's something I'm missing).

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >>

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