Mai P. Itakura, CPA

I get asked this a lot. The Home Office Deduction for Small Businesses. If you're a small business owner who uses your home for business you may be eligible to claim the home office deduction, which allows you to deduct certain home expenses on your tax return. The benefit to this, of course, is that it can reduce the amount of your taxable income. Here are seven tips to help you understand the home office deduction and determining whether you can claim the home office deduc...tion on your tax return: 1. The home office deduction is available to both homeowners and renters. 2. There are certain expenses taxpayers can deduct including mortgage interest, insurance, utilities, repairs, maintenance, depreciation, and rent. 3. Taxpayers must meet specific requirements to claim home expenses as a deduction; however, the deductible amount of these types of expenses may be limited. 4. The term "home" for purposes of this deduction is defined as a house, apartment, condominium, mobile home, boat or similar property. It also includes structures on the property such as an unattached garage, studio, barn or greenhouse. It does not include any part of the taxpayer's property used exclusively as a hotel, motel, inn or similar business. 5. To qualify for the home office deduction your home must meet two basic requirements: There must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business. The home must be the taxpayer's principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home, but also uses their home to conduct business may still qualify for a home office deduction. 6. Expenses that relate to a separate structure not attached to the home qualify for a home office deduction only if the structure is used exclusively and regularly for business. 7. Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction: Simplified option. This option uses a rate of $5 a square foot for business use of the home. The maximum size for this option is 300 square feet. The maximum deduction under this method is $1,500. Regular method. Deductions for a home office are based on the percentage of the home devoted to business use. Taxpayers who use a whole room or part of a room for conducting their business need to figure out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full. Please call if you have questions about the home office deduction.

I have a large capital gain this year. What should I do? If you also have an investment on which you have an accumulated loss, it may be advantageous to sell it prior to year-end. Capital gains losses are deductible up to the amount of your capital gains plus $3,00 ($1,500 for married filing separately). If you are planning on selling an investment on which you have an accumulated gain, it may be best to wait until after the end of the year to defer payment of the taxes for another year (subject to estimated tax requirements).

Minimum wage has increased for California to $12/hr. Employers - if you are paying your employees less than $12/hr. you will need to increase their hourly rate.

Medical Expense Deduction The IRS considers obesity a disease, and therefore amounts paid for participation in a weight loss program as treatment for obesity are deductible medical expense for medical care.

What do you do when you get a letter from the IRS? Each year, the IRS mails millions of notices and letters to taxpayers for a variety of reasons. If you receive correspondence from the IRS here's what to do: Don't panic. You can usually deal with a notice simply by responding to it. Most IRS notices are about federal tax returns or tax accounts.... Each notice has specific instructions, so read your notice carefully because it will tell you what you need to do. Your notice will likely be about changes to your account, taxes you owe or a payment request. However, your notice may ask you for more information about a specific issue. If your notice says that the IRS changed or corrected your tax return, review the information and compare it with your original return. If you agree with the notice, you usually don't need to reply unless it gives you other instructions or you need to make a payment. If you don't agree with the notice, you need to respond. Write a letter that explains why you disagree and include information and documents you want the IRS to consider. Mail your response with the contact stub at the bottom of the notice to the address on the contact stub. Allow at least 30 days for a response. For most notices, there is no need to call or visit a walk-in center. If you have questions, call the phone number in the upper right-hand corner of the notice. Be sure to have a copy of your tax return and the notice with you when you call. If you need assistance understanding an IRS Notice or letter, don't hesitate to call the office. Always keep copies of any notices you receive with your tax records. Be alert for tax scams. The IRS sends letters and notices by mail and does NOT contact people by email or social media to ask for personal or financial information. If you owe tax, please call to find out what your options are.

This news does not excite me. Either way...I'm done!

Did you make transactions using virtual currency? There may be huge penalties and tax consequences if not reported properly on your tax returns.

I wonder why celebrities think it's okay not paying taxes.

Should You Prepay your 2018 Property Taxes? I’ve been asked by several people whether they should pre-pay their property taxes by December 31st. Here are a few minor points: 1) If you are subject to AMT (alternative minimum tax), it does not make a difference. AMT disallows state and local tax deductions, so by prepaying your property taxes, this will not lower your tax bill. ... 2) You cannot prepay your property taxes if you have not received a bill for 2018. If you are no assessed for 2018, you can’t make the payments. 3) You are still able to deduct up to $10,000 in state and local taxes in 2018. Be sure to leave yourself some deductions for 2018. Call me at 858-832-7229 for any questions.