[ggcsquicksig] Re: utilities tax category
- From: "Irma" <irmbo@xxxxxxxxxxx>
- To: <ggcsquicksig@xxxxxxxxxxxxx>
- Date: Sat, 9 Feb 2013 08:31:56 -0800
I very much appreciate your detailed explanation, Tom. I feel more
comfortable not itemizing utilities now, as my usage of those utilities
doesn't qualify for "preservation or creation or maintenance of income". I
will save this information for further reference.
Thanks very much.
Irma----- Original Message -----
From: "Tom.Spott" <tom.spott@xxxxxxxxx>
To: <ggcsquicksig@xxxxxxxxxxxxx>
Sent: Saturday, February 09, 2013 8:17 AM
Subject: [ggcsquicksig] Re: utilities tax category
> Babette is correct, in general.
>
> First, let's define "utilities" - water, sewer, electricity and gas. Some
> people extend that short list to internet, telephone, cell phones, etc.
> First let me discuss the first list - for a "tax deduction" you would
> group
> these together as one item. You could break each item out if you desired
> but accountants charge by the hour so giving the accountant more summaries
> will lower your - i.e. dealing with less things.
>
> Now to be "deductible" the item must be either used in a "trade or
> business"
> (the schedule C Babette mentioned) or in the "preservation or creation or
> maintenance of income" - for example, a rental property (say you rent out
> an
> in-law unit) or an investment activity. Or, this could be incurred in
> connection with a charitable activity.
>
> Say you have a home office (see IRS Pub 587
> www.irs.gov/pub/irs-pdf/p587.pdf). This is an area used "regularly and
> exclusively" for business (often a tough test to meet for most of us).
> You
> would take the square footage of the office area. Say your desk and desk
> chair use 6 feet by 6 feet (36 square feet)(it doesn't have to be a
> separate
> room). Say your house is 360 square feet (just an easy number for a
> retired
> guy to use). So then 10% (36/360) of the house is office space. You then
> take 10% of all the "utilities" and that is your home office deduction for
> the utilities. The concept here is that you can't specifically identify
> the
> cost to the home office so an allocation using square feet would be
> reasonable and appropriate.
>
> Let's now look at the second list. The same rule for deductibility
> applies
> - it needs to be associated with a business or an investment or a charity.
> Say you don't use your office as a tax deduction because you not only do
> your business there you also watch HULU and chat with friends on FaceBook
> and play solitaire, etc. at your desk. But, let's say you do use the
> internet line for business. Since you can't identify the specific charges
> on your bill, you can make an allocation. The government wants you to be
> reasonable on how you make that allocation. So, you could keep a log of
> all
> internet use and label each item of time as "personal" or "business." At
> the end of the year, you add up all the hours for each category -that is
> your 100%. Then divide the business hours by the total hours to get a
> business percentage. Then apply the business percentage to all the bills
> for
> internet. There's your deduction. Use the same technique for your cell
> phone, telephone, etc.
>
> Most people can't be bothered with all this minutiae so they sit back and
> think about it then pick a percentage of what sounds about right and just
> use that. Then when they get audited they argue with the government on
> whether or not they were reasonable under the circumstances. If they have
> their records to support the allocation, they win automatically and if
> they
> use speculation on the percentage it depends on what mood the auditor is
> in,
> how big the deduction is, whether the story is plausible, what policies
> the
> auditor is held to when his manager reviews your case file, etc. A real
> crap shoot!
>
> I hope this long windy example is helpful. I went at length because
> people
> get confused with home office deductions. They read the IRS booklet and
> say
> well, I don't qualify for home office deductions and go away when they
> could
> have claimed something. Say you are a writer (I wrote a book "US Taxes
> for
> Non-US Citizens, Made Easy" - see www.NRTaxGuide.com) and you use the
> internet to stay current on your topic, discuss the book with readers,
> etc.
> Your home office is not used exclusively for business but the internet is
> heavily used for business. Hence I have a deduction against my writing
> income for the internet expense. Say you are an investor - you have a
> retirement account and a few mutual funds. Say you use your internet for
> research and such to buy and hold and sell securities. Just like the fees
> on these accounts are deductible as investment expenses, the internet use
> for "preservation or creation or maintenance of income" is another
> deduction. That includes your cell phone usage to check on these items as
> a
> portable computer (if you have a data plan say) or to call your investment
> manager or broker to place a trade or discuss a holding.
>
> Say you are active in a charitable activity like Babette. She uses her
> internet as part of her volunteer work at GGCS. So, she can allocate the
> cost as an out of pocket cost and take that deduction. She can also claim
> mileage for use of her car back and forth to the GGCS sig/general
> meetings.
> She can allocate her cell phone usage to the GGCS services. She can't make
> an office in home deduction because being active in a charity is not a
> "trade or business" because there is no income generating activity. But,
> say Babette is also a consultant and gets lots of business from GGCS
> members
> - now these expenses are all "trade or business" expenses and deductible
> in
> those lines.
>
> Confusing, huh? That is why the Internal Revenue Code needs to be
> overhauled. They haven't overhauled it since 1986 so it is high time. It
> is
> on someone's agenda but we'll see if it moves along.
>
> But, now I'm rambling aren't I?
>
> See ya Tuesday 2/12 10AM.
>
> Tom
>
>
>
>
>
>
> -----Original Message-----
> From: ggcsquicksig-bounce@xxxxxxxxxxxxx
> [mailto:ggcsquicksig-bounce@xxxxxxxxxxxxx] On Behalf Of bcbloch@xxxxxxxx
> Sent: Thursday, February 07, 2013 11:21 AM
> To: ggcsquicksig@xxxxxxxxxxxxx
> Cc: tom.spott@xxxxxxxxx
> Subject: [ggcsquicksig] Re: utilities tax category
>
> I hope Tom Spott will chime in on this.
>
> It's my impression that Utilities are not deductible unless you are
> itemizing home office space and usage, and then it's a percentage of the
> whole bill. In that case, they would be reported on Schedule C, as a
> business expense, not on Schedule A as in itemized deductible expense.
>
> I have no idea whether you have to break them out as to which kind of
> Utility it is.
>
> I do have sub categories for types of Utilities...e.g., PGE, Water,
> Telephone, Computer ISP, Garbage, etc. just to be able to keep track of
> how
> much we spend on each of them.
>
> Considering our heating bill this year, I wish we COULD deduct it! <g>
>
> Babette
>
>
> On Thu, 7 Feb 2013 11:02:08 -0800 "Irma" writes:
>> Hi Babette,
>>
>> I'm confused about the category Utilities. In CA do we itemize water
>> and sanitary services or not? A former accountant had told me it
>> wasn't
>>
>> necessary.
>>
>> Thanks, Irma
> GGCSQUICKSIG is the Email list for members of the Golden Gate Computer
> Society's Quicken Special Interest Group.
>
> TO SEND A MESSAGE TO SIGLEADER BABETTE BLOCH "OFFLIST" -
> Email to: ggcsquicksig@xxxxxxxxxxx
>
> TO UNSUBSCRIBE: Send an Email Message to:
> ggcsquicksig-request@xxxxxxxxxxxxx
> In the "Subject": line, type "unsubscribe" (without the quotes).
>
>
>
>
>
>
> GGCSQUICKSIG is the Email list for members of the Golden Gate Computer
> Society's Quicken Special Interest Group.
>
> TO SEND A MESSAGE TO SIGLEADER BABETTE BLOCH "OFFLIST" -
> Email to: ggcsquicksig@xxxxxxxxxxx
>
> TO UNSUBSCRIBE: Send an Email Message to:
> ggcsquicksig-request@xxxxxxxxxxxxx
> In the "Subject": line, type "unsubscribe" (without the quotes).
>
>
>
>
>
>
GGCSQUICKSIG is the Email list for members of the Golden Gate Computer
Society's Quicken Special Interest Group.
TO SEND A MESSAGE TO SIGLEADER BABETTE BLOCH "OFFLIST" -
Email to: ggcsquicksig@xxxxxxxxxxx
TO UNSUBSCRIBE: Send an Email Message to: ggcsquicksig-request@xxxxxxxxxxxxx
In the "Subject": line, type "unsubscribe" (without the quotes).
Other related posts:
