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What Is a Serial Entrepreneur?

A serial entrepreneur starts several businesses one after another rather than beginning one venture and staying focused on it for many years like a more typical entrepreneur. Serial entrepreneurs may sell their businesses after they reach a certain level of … Continue reading →

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12 Best Business Bank Account Promotions & Offers – January 2021

Savvy small-business owners, solopreneurs, and freelancers who know where to look can find lucrative account-opening and referral bonuses on new bank accounts needed to conduct their everyday business. These are the best business bank account promotions available today.

12 Best Business Bank Account Promotions & Offers – January 2021 is a post from Money Crashers.

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Current Mortgage Rates Rise to Start the Week

Here we go with another week. Current mortgage rates have been rising steadily over the past month, a trend that we expect to persist for the foreseeable future. Inflation data, overseas trade negotiations, and speaking engagements from the Federal Reserve should be the main market movers this week. Read on for more details. Where are… View Article

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Should We Employ Our Own Kids? (and How Much to Pay Them)

Way back in 2015, I had a nine year old boy. Even back then, I could see him showing some early flashes of adulthood and maturity, and it got me wondering about his future as it relates to money and freedom. So I wrote a post called What I’m Teaching My Son About Money, which shared some […]

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A Comprehensive Guide to 2020 Tax Credits

Every year, people’s lives change in ways that affect their taxes. They may start a higher education program or have a child, and others take on elderly parents as dependents. These situations can change their eligibility for tax credits. In … Continue reading →

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5 Things to Know About the Home Office Tax Deduction and Coronavirus

Since the coronavirus quarantine began, many people have been forced to work from home. If you didn’t have a home office before the pandemic, you might have had a few expenses to set one up. I’ve received several questions about what benefits are allowed for home offices during the COVID-19 crisis.

One question came in on the QDT coronavirus question page. Money Girl reader Ian said:

"I have a question about next year's taxes and working from home. For the past 13 weeks, I have been forced to work from a home office. (I am a regular W-2 employee, not self-employed.) I have had some expenses come up that were brought about by working from home: a computer upgrade so I can better connect to Wi-Fi, a new router, and even a desk chair so I am comfortable while I work. Should I be keeping track of those expenses? Will they be deductible? My employer is not going to reimburse them. Thank you for your help!"

Another question came from Miki, who used my contact page at Lauradadams.com to reach me. She said:

"Hi, Laura, and thank you for a wonderful podcast! I've been listening for years and have always thought that you'd have a show for any question I could ever think of. But this new situation with COVID-19 has made me think of something that I'm sure many of us are dealing with right now.

"To start working from home, I had to spend quite a bit of money to get my home office on par with my actual office. I know you've done episodes on claiming home office expenses on taxes before, but could you do an episode on whether we can claim home office expenses on our taxes next year? And if we can, things we should start thinking about now (aside from saving the receipts)?"

Thanks for your kind words and thoughtful questions! I'll explain who qualifies for a home office tax deduction and serve up some tips for claiming it.

5 things to know about the home office tax deduction during coronavirus

Here's the detail on five things you should know about qualifying for the home office tax deduction in 2020.

1. COVID-19 has not changed the home office tax law

The CARES Act changed many personal finance rules—including specific tax deadlines, retirement distributions, and federal student loan payments—but the home office tax deduction is not one of them. In a previous post and podcast, Your Guide to Claiming a Legit Home Office Tax Deduction, I covered the fact that the Tax Cuts and Jobs Act (TCJA) of 2017 drastically changed who can claim this valuable deduction.

Before the TCJA, you could claim a home office deduction whether you worked for yourself or for an employer either full- or part-time. Unfortunately, W-2 employees can no longer take advantage of this tax benefit. Now, you must have self-employment income to qualify. My guess is that the IRS was concerned that it was too easy to abuse this benefit and reined it in.

Before the TCJA, you could claim a home office deduction whether you worked for yourself or for an employer either full- or part-time. Unfortunately, W-2 employees can no longer take advantage of this tax benefit.

The best option for an employee is to request expense reimbursement from your current or future employer even though they're not obligated to pay you. If you get pushback, make a list of all your home office expenses so it's clear how much you spent on their behalf. They might consider it for your next cost of living raise or bonus.

Unless Miki or Ian have a side business that they started or will start, before the end of 2020, they won't get deductions to help offset their home office setup costs.

 

2. The self-employed can claim a home office tax deduction

Let’s say you use a space in a home that you rent or own for business purposes in 2020. There are two pretty straightforward qualifications to qualify for the home office deduction:

  • Your home office space must be used regularly and exclusively for business
  • Your home office must be the principal place used for business

You could use a spare bedroom or a hallway nook to run your business. You don’t need walls to separate your office, but the space should be distinct—unless you qualify for an exemption, such as running a daycare. It’s permissible to use a separate structure, such as a garage or studio, as your home office if you use it regularly for business.

You must use your home as the primary place you conduct business—even if it’s just for administrative work, such as scheduling and bookkeeping. However, your home doesn’t have to be the only place you work in. For instance, you might work at a coffee shop or meet clients there from time to time and still be eligible for a home office tax deduction.

3. Your business can be full- or part-time to qualify for a home office tax deduction

If you work for yourself in any trade or business, either full- or part-time, and your primary office location is your home, you have a home business. No matter what you call yourself or your business, if you have self-employment income and do any portion of the work at home, you probably have an eligible home office. You might sell goods and services as a small business, freelancer, consultant, independent contractor, or gig worker.

If you work for yourself in any trade or business, either full- or part-time, and your primary office location is your home, you have a home business.

As I previously mentioned, the work you do at home could just be administrative tasks for your business, such as communication, scheduling, invoicing, and recordkeeping. Many types of solopreneurs and trades do most of their work away from home and still qualify for a legitimate home office deduction. These may include gig economy workers, sales reps, and those in the construction industry.

4. You can deduct direct home office expenses for your business

If you run a business from home, your direct home office expenses qualify for a tax deduction. These are costs to set up and maintain your office, such as furnishings, installing a phone line, or painting the walls. These costs are 100% deductible, no matter the size of the office.  

5. You can deduct indirect home office expenses for your business

Additionally, you’ll have costs that are related to your office that affect your entire home. For instance, if you’re a renter, the cost of rent, renters insurance, and utilities are examples of indirect expenses. You’d have these expenses even if you didn’t have a home office.

If you own your home, potential indirect expenses typically include mortgage interest, property taxes, home insurance, utilities, and maintenance. You can't deduct the principal portion of your mortgage payment, which is the amount borrowed for the home. Instead, you’re allowed to recover a part of the cost each year through depreciation deductions, using formulas created by the IRS.

Allowable indirect expenses actually turn some of your personal costs into home office business deductions, which is fantastic! They’re partially deductible based on the size of your office as a percentage of your home—unless you use a simplified calculation, which I’ll cover next.

How to calculate your home office tax deduction

If you qualify for the home office deduction, there are two ways you can calculate it: the standard method or the simplified method.

The standard method requires you to keep good records and calculate the percentage of your home used for business. For example, if your home office is 12 feet by 10 feet, that’s 120 square feet. If your entire home is 1,200 square feet, then diving 120 by 1,200 gives you a home office space that’s 10% of your home.

In this example, 10% of your qualifying expenses could be attributed to business use, and the remaining 90% would be for personal use. If your monthly power bill is $100 and 10% of your home qualifies for business use, you can consider $10 of the bill a business expense.

To claim the standard deduction, use Form 8829, Expenses for Business Use of Your Home, to figure out the expenses you can deduct and then file it with Schedule C, Profit or Loss From Business.

The simplified method doesn’t require you to keep any records, which makes it incredibly easy to claim. You can claim $5 per square foot of your office area, up to a maximum of 300 square feet. So, that caps your deduction at $1,500 (300 square feet x $5) per year.

The simplified method requires you to measure your office space and include it on Schedule C. It works best for small home offices, while the standard approach is better when your office is bigger than 300 square feet. You can choose the method that gives you the largest tax break for any year.

No matter which method you choose to calculate a home office tax deduction, you can't deduct more than your business's net profit. However, you can carry them forward into future tax years.

Also note that business expenses that are unrelated to your home office—such as marketing, equipment, software, office supplies, and business insurance—are fully deductible no matter where you run your business.

If you have any questions about qualifying business expenses, home office expenses, or taxes, consult with a qualified tax accountant to maximize every possible deduction and save money. The cost of working with a trusted financial advisor or tax pro is worth every penny.

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New Rules May Offer You More Protection Against Debt Collectors

Dealing with debt collectors can be a real drag, especially if they’re constantly hounding you to pay up. The Fair Debt Collection Practices Act (FDCPA) protects consumers against harassment from debt collectors but the industry still generates millions of complaints … Continue reading →

The post New Rules May Offer You More Protection Against Debt Collectors appeared first on SmartAsset Blog.

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4 credit cards offering a $500 sign-up bonus

Cash back cards are offering higher and higher bonuses to compete with other rewards currencies – even up to $500 or more.

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How to Cope with Change at Work Without Stressing Out

While each person’s experience in 2020 has been unique, I bet many of you lived through some version of the following:

One day you were in an office, shaking hands, having in-person meetings, and serving a known set of customer needs. And the next day, your home was your office, Zoom was your conference room, handshakes were lethal, and customer needs were being completely reinvented.

Feel familiar?

Change has become our everything. Get ready to be stretched.

Prior to 2020, you could still get by as a great performer at work even if you were a little resistant to change. But now? Not so much. Change has become our everything. And if it’s not something you naturally lean into, then the time has come to fix it. Stat. 

So if you’re someone whose default has been 'I don’t want to learn this new system, process, or way of engaging with customers…', then get ready to be stretched. If you want your career to continue to soar, you’re going to need to be able to roll with change.

Resisting change is natural

If you find it hard to get comfortable with change, you're not alone.

When my kids were babies, getting them to try new foods was an experience. After they spit spoon after spoon of strained peas or carrots back into my face, I talked to my pediatrician. I learned it would take seven to eight experiences with a new food before my baby would begin to like it, or at least stop spitting it at me.

In our work lives, we’re not always offered a grace period of seven to eight exposures to a new idea.

This is due to the mere-exposure effect. While we may like or appreciate some things out of the gate (hello, chocolate fudge sundaes), our natural inclination is often to resist anything that feels different. But more exposure equals more comfort. We're wired to prefer the familiar and comfortable.

But in our work lives, we’re not always offered a grace period of seven to eight exposures to a new idea before we have to adopt it.

So let’s talk about actions you can take to open your mind and expand your comfort zone with change.

1. Scope the change

Sometimes “a change is coming” can sound like “the sky is falling.” But usually, the blue abyss above stays put. So let’s start by putting change into perspective.

Before you panic, check the sky. Is it still there? Phew! You’re OK.

Your boss just told you that you’ll be reporting to a new team. Or you’re switching to a new people-management system, or you’ll be managing a new product or account. Before you panic, check the sky. Is it still there? Phew! You’re OK.

Start by asking yourself what's really changing and what’s staying the same. You may have a new boss or new relationships to manage, but your day-to-day responsibilities aren’t shifting.

You may have a new system to learn, but the data it’s tracking, the reporting it offers—how different will they really be? Your skills will carry over.

So start by putting some boundaries around the change. This should help you take a deep breath. Now, let’s charge ahead!

2. Find your bright spots

When my kids—the spitters of pureed peas and carrots—began remote schooling this year, the change was all kinds of unwelcome. They missed friends. Their new homeroom teacher (yours truly) was highly unqualified. Everything felt messed up.

But I asked them to spend a few minutes finding and focusing on the bright spots. Because every change has bits of sparkle.

Focusing on bright spots helps open your mind, readying it for the change ahead.

They came up with extra sleep (don’t we all need it?!), jammies all day, and breakfast and lunch in bed. (Yes, we've let go of the reins a bit here at my house.)

Maybe for you, it’s the opportunity to add fluency in a new system to your resume, or to build your reputation with a new leader, team, or customer base. What’s something you can get excited about?

Big or small, focusing on bright spots helps open your mind, readying it for the change ahead.

3. Acknowledge the pains and challenges of change

Do focus on the upside. But not at the expense of acknowledging and preparing for the challenges. Don’t put your head in the sand.

If this triggers mild concern or anxiety, don’t push that down. Give it space. Address it.

We resist change for a reason. There will be growing pains. Transitioning to a new system does provide you with new opportunities. But there will also be a learning curve. It will take time, focus, and effort. You’ll be pushed out of your comfort zone. If this triggers mild concern or anxiety, don’t push that down. Give it space. Address it.

Part of gaining comfort with change is giving yourself a chance to master it. The only way to master change is to resolve and repair pain points. We can’t resolve what we can’t see, so give yourself the space to list out every single thing, big or small, that scares or challenges you.

RELATED: Why Negative Emotions Aren't All Bad

What might live on your list?

  • Finding time to learn a new system
  • Having to build new relationships virtually
  • Feeling like a novice after years of feeling like an expert

4. Identify actions within your locus of control

Part of what makes change feel scary is the sense of losing control.

According to the Harvard Business Review:

Many employees have had to abruptly accept fundamental changes to their work routines. And these changes have been stressful… because [they have] stripped people of their autonomy… [which] is detrimental for employee performance and well-being.

In other words, it’s normal to crave a sense of autonomy, of control. So here is where you focus on what you can control, and you make it happen.

Look at your sources of anxiety or discomfort. Identify tangible actions you can take to close the gap or minimize the pain of change.

When I left the world of full-time employment to start my own business, I was terrified of managing that change, even though I’d been the one to initiate it. But as a taker of my own medicine, I followed this very process. And when I arrived at this step, I identified a series of actions in my control.

Here’s a sampling of what I came up with

  • Invite every small business owner I know to coffee and pick their brain
  • Read one book per month on a relevant topic—consulting, marketing, pricing, etc.
  • Hire a coach to help me learn to build
  • Hire a lawyer to ensure I don’t step off a cliff

You get the idea. I was stepping into the unknown. But by identifying a series of actions designed to get me incrementally closer to known, I was re-establishing a sense of autonomy and control.

Maybe you have to learn a new system and you’re afraid it will be complicated. What steps can you take to close the gap? What can you control?

5. Commit positive change experiences to memory

I reflect on the days of smushed peas and carrots. Mostly, it was gross. But once in a blue moon, a baby would accidentally swallow a mouthful. And I was nothing but jazz hands. 

Turns out, my jazz-hands-enthusiasm was accidental genius because now, baby associated mush with entertaining Mommy gymnastics. For her it became fun. And over time she downed more mush.

And really, that’s kind of your goal. 

When you have your first positive experience with that new system, even if it was an accident, make a note of it. When your first client lights up at the description of that new product feature, capture that.

These winning moments add up over time. And suddenly one day you realize: Hey, these smashed peas and carrots are kinda delish! Who knew?