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My wife has an LLC elected as an S-Corp. She is 100% shareholder. She

My wife has an LLC...
My wife has an LLC elected as an S-Corp. She is 100% shareholder.

She maintains a home office (her only office) and garage space for her company car. What is the best way to reimburse her for or deduct this expense? Market rate for this type of space in our area is around 400/mo

also, we have made many improvements to our property to accommodate her business can we deduct those?
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Answered in 21 minutes by:
9/4/2013
DanielleCPA
DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 794
Experience: Years of Experience in Business & Personal Taxes
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Welcome and thanks for your question!

As far as deducting the home office expenses, you have a few options, but the best, XXXXX XXXXX efficient option is for the S corp to reimburse your wife for the expenses under an accountable plan. Your wife should create an accountable plan document (here is a sample) and create an expense reimbursement form that your wife can use every month to submit her reimbursement. I suggest having two sections on the form - one for non home office expenses (postage, mileage, office supplies, etc) and the second to calculate the home office reimbursement. You would want the form to show the business use percentage (home office square footage/total home square footage). You would list all home expenses (mortgage interest, real estate taxes, utilities, etc.) on the form and multiply by the business percentage to compute your monthly reimbursement.

Please note that you would need to reduce your Schedule A deductions on your 1040 by any amounts reimbursed for mortgage interest and property taxes.

If the improvements were exclusively for business use (e.g. a separate entrance for the office), you may deduct them, but depending on the nature of the improvements, they will be subject to depreciation rather than immediate expensing.
DanielleCPA
DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 794
Experience: Years of Experience in Business & Personal Taxes
Verified
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