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12/08/2014

Figuring out the Business Use of Your Home

This month is a big milestone for us. Jason has been receiving fees for his LLC since November, but this is the first month that he has made enough money to pay for business-related expenses that are connected to our personal lives. So how does that work?

Using IRS articles about Home Office Deductions and Business Use of Your Home, I determined the following: Since Jason works from a home office, a portion of our home expenses can be paid by his business income. Using the simplified method created by the IRS, I multiply $5 by the square feet of his office. That means each month approximately $630 of his business income could be spent towards housing expenses such as mortgage, Internet, water, electricity, and insurance.

Using IRS articles about Car Expenses and Standard Mileage Rates for the business use of a car, I determined the following: The easiest way to track the use of our car for business purposes is by documenting the exact mileage (for each business) every time we use the car for business purposes. I multiply the monthly mileage by the standard rate of 56 cents to determine how much can be spent on expenses related to the car. As a result, this month Jason is able to cover our bi-annual, December car insurance bill using his business income.

The creation of an LLC allows the business income to be used pre-tax because it is related to business expenses. Now that some of our home and auto expenses are being covered by Jason’s business, we believe that we will have more money from my full-time job to put into our personal savings account! Adding to our savings account since Jason’s job loss has been extremely difficult because almost all of my full-time income goes towards paying our debts and monthly expenses. It’s such a good feeling to finally start experiencing the financial benefits from the income generated by Jason’s LLC! 

For information on Summit's business services visit: https://www.summitcreditunion.com/for_businesses.html

For information in Summit's auto loans visit: https://www.summitcreditunion.com/loans/auto.html

 

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