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Are you missing out on one of the most overlooked tax deductions available to small business owners?

In this episode, Mike Jesowshek discusses the often misunderstood home office tax deduction, breaking down its requirements and benefits for small business owners. He covers the main qualifications, including exclusive business use and regular use, as well as the administrative office rule that opens the door for many professionals to take advantage of this deduction. Mike also compares the simplified and actual methods of calculating the deduction and offers practical advice on maintaining proper documentation to ensure compliance and maximize savings.

Learn how the home office deduction can reduce your tax bill and boost your savings by tuning in!

[00:00 - 05:25] Introduction to Home Office Deduction

• Mike explains the common misconceptions about the home office deduction.
• He stresses that the IRS encourages this deduction as long as it's used correctly.
• The home office must be used exclusively for business and on a regular basis.
• Mike explains that areas like the dining room don't qualify, but dedicated spaces do.
• He introduces the administrative office rule, allowing home offices to qualify even if work is done elsewhere.

[05:25 - 11:03] Calculating and How to Claim the Home Office Deduction

• Simplified method: $5 per square foot, up to 300 sq. ft.
• Actual method: Business use percentage multiplied by total home expenses.
• Mike walks through an example of calculating the deduction using both methods.
• He highlights when the actual method may provide larger savings.
• Mike explains how sole proprietors and S corporations claim the deduction using different forms.

[11:03 - 18:08] Importance of Documentation

• Emphasizes the need for thorough documentation, such as taking pictures and keeping cost records, to protect against audits.
• Mike encourages business owners to take advantage of this deduction before year-end.

Direct Quotes:

"The home office deduction is black and white in the tax code. The IRS wants you to take advantage of it." - Mike Jesowshek, CPA

"Every deduction is worth it. This takes very little time as long as you have the tools to help make it happen." - Mike Jesowshek, CPA

"The key to successfully using the home office deduction is proper documentation and following the rules." - Mike Jesowshek, CPA

Check out this episode’s blog post: How Does the Home Office Deduction Work?

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join TaxElm: https://taxelm.com/

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Podcast Website: https://www.TaxSavingsPodcast.com

Facebook Group: https://www.facebook.com/groups/taxsavings/

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Are you maximizing your healthcare tax savings as a business owner?

In this episode, Mike Jesowshek discusses health care-related tax strategies for business owners, focusing on tools like Health Savings Accounts (HSAs), self-employed health insurance deductions, and Medical Expense Reimbursement Plans (Section 105). He explains how these strategies can help business owners minimize taxes while optimizing healthcare costs, both for themselves and their employees. Mike emphasizes the importance of understanding tax laws and maximizing deductions to lower tax liability while ensuring business owners can grow their wealth and take care of their healthcare needs.

Learn how HSAs, Section 105 plans, and self-employed health insurance deductions can lower your tax liability while protecting your health!

[00:00 - 05:53] Health Savings Accounts (HSAs)

• Mike explains how HSAs provide tax benefits: tax deduction on contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
• HSAs are powerful tools for both business owners and individuals, acting as a secondary retirement account for future medical costs.

[05:53 - 10:00] Self-Employed Health Insurance Deductions

• Mike details how self-employed individuals can deduct health insurance costs, focusing on sole proprietors, LLCs, and S corps.
• S corp owners must run health insurance premiums through their business and add them to their W-2s to receive deductions.

[10:00 - 19:27] Health Benefit Options for Small Business Owners with Employees

• Mike discusses section 105 plans or Medical Expense Reimbursement Plans, and how it's useful for business owners with high out-of-pocket medical costs.
• These plans turn medical expenses into business expenses, offering significant tax savings.
• He explains the three primary options: group health insurance, wage increases, or QSEHRA/HRAs to reimburse employees for medical costs.
• QSEHRA is a flexible and cost-effective option for small businesses with fewer than 30 employees.

Quotes:

"Think of an HSA as a secondary retirement plan because, at some point, we’re all going to face medical costs." - Mike Jesowshek, CPA

"If you're self-employed, you get a tax deduction for your health insurance, regardless of whether you cover your employees’ costs or not." - Mike Jesowshek, CPA

"QSEHRA allows small businesses to support their employees’ healthcare needs without the burden of a traditional group health plan." - Mike Jesowshek, CPA

Resources:

Blog: Tax Planning and Health Costs
https://www.taxsavingspodcast.com/blog/Health-Costs-Strategies-for-Small-business-owners


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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join TaxElm: https://taxelm.com/

IncSight Packages (Full-Service): https://incsight.net/pricing/

Book an Initial Consultation (IncSight): https://app.simplymeet.me/o/incsight/sale

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Podcast Website: https://www.TaxSavingsPodcast.com

Facebook Group: https://www.facebook.com/groups/taxsavings/

YouTube: https://www.youtube.com

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Could your business deductions survive an IRS audit?

In this episode, Mike Jesowshek breaks down a real-life case where a business owner lost $2 million due to an IRS audit after attempting to write off a yacht as a business expense. He explains how poor bookkeeping and a lack of proper documentation led to the disallowance of the deduction. Mike emphasizes the importance of understanding and correctly implementing tax strategies, along with maintaining detailed records to defend against audits. The episode highlights the need for business owners to carefully substantiate deductions and avoid shortcuts, even when seemingly successful entrepreneurs do so.

[00:00 - 05:06] Lessons from Poor Bookkeeping

• Mike highlights a case where a business owner wrote off a $2 million yacht as a business expense.
• The IRS disallowed the deduction due to poor records and no evidence of business-related activities.
• Mike stresses the importance of having clear documentation and bookkeeping to defend business expenses in an audit.
• He discusses how many business owners wrongly assume that if someone else gets away with a deduction, they can too.

[05:06 - 07:04] Understanding Business Deductions

• Business deductions must be ordinary and necessary for the type of business.
• It is not enough to claim the deduction; proof must be provided through proper logs and receipts.
• Mike emphasizes the importance of correct implementation, using the home office deduction as an example.
• Even legitimate deductions can be disallowed if not implemented and documented properly.

[10:12 - 14:52] Correct Documentation: A Defense Against Audits

• Having detailed records and logs can protect business owners if the IRS audits them.
• Mike shares an example of a client who successfully navigated an audit by having all documentation in place.
• He also touches on various tax strategies like the Augusta rule, employee entertainment, and travel deductions.

Direct Quotes:

"Bookkeeping is the backbone of a business. Not only does it help your business grow, but it also helps defend your business expenses in the event of an audit." - Mike Jesowshek, CPA

"Just because someone down the road takes a deduction and doesn't get caught doesn't mean it’s right or that you won't get caught." - Mike Jesowshek, CPA

"A business deduction has to be ordinary and necessary for your type of business, and then you need the proof to back it up." - Mike Jesowshek, CPA

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join TaxElm: https://taxelm.com/

IncSight Packages (Full-Service): https://incsight.net/pricing/

Book an Initial Consultation (IncSight): https://app.simplymeet.me/o/incsight/sale

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Podcast Website: https://www.TaxSavingsPodcast.com

Facebook Group: https://www.facebook.com/groups/taxsavings/

YouTube: https://www.youtube.com