ForConstructionPros.com

A lot of our readers have home offices. What steps do they need to take to make sure they are eligible for the home office deduction?

A deduction for a home office is available if it is used on a regular and exclusive basis for business. Review with your tax adviser whether the “regular and exclusive” test is met. Also calculate the potential benefit before deciding to claim the deduction. This deduction would include depreciation expense on the home. Taxpayers should consider that this depreciation will be taxable if the home is sold later. This is a legitimate deduction and is often overlooked.

As our readers look to next year, what are some of the things they can be doing throughout the year to lighten their tax burden?
The tax planning that is done for 2005 should consider the tax picture for 2006. For example, if taxable income is expected to be large in 2006, it actually may be beneficial to accelerate income into 2005 and pay tax at a lower tax rate. The same strategy applies for deductions and equipment purchases.

Why should contractors work with a professional tax adviser?

The tax adviser will assist in interpreting the many tax provisions that will impact the contractor’s tax liability. The adviser should also provide valuable planning in areas such as the type of entity for the business and succession planning.