My wife works from home. She has about $4000 dollars in office expenses this year. We are filing a joint return Married. Do I base the 2% AGI limit on her salary or our combined household salary. Example if we made $90k this year. $90K x 2% = $1800. $4000 - $1800 = $2200 in deductions. Her alone would be $37k x 2% = $740. $4000 -$ 740 = $3260 deduction! Much Better Which is it? Does anyone know of Tax Software that does this?
2007-12-05 03:14:56 · 7 answers · asked by jipn12 1 in Business & Finance ➔ Taxes ➔ United States
Also If I had expenses that I did not add to 2006 return can add them to 2007 expenses? Probably the answer is no.
2007-12-05 03:16:08 · update #1
Also. Last year we had an family friend accountant do our taxes because I wasn't sure about State Income Tax for my wife. Her company is based out of Florida with no State Income tax but we live in Mass 5.3% income tax. The accountant said there was a Lu-pole in the system and we didn't have to file her income with the State of Mass. I'm confused as how I should file her. As a resident with No income. Is this how he did it? Looking over the return he filed that is what it looks like.
2007-12-05 03:57:23 · update #2
Is your wife an employee who receives a W-2? Then the previous answers apply and her office expenses result in a $2,200 deduction for you on your joint return.
If she is not an employee, the entire office expenses is deducted on her Schedule C and will reduce her net profit dollar for dollar.
In either case, MA state income taxes are due on your wife's income earned from her home in Massachusetts. Amend your last year's return before the letter from the state arrives, to minimize the interest you now owe on the unpaid state income taxes.
You may also figure your taxes as married filing separate. Usually this is not advantageous, but it would be a way to get the larger deduction for your wife's expenses and might benefit you.
2007-12-06 02:04:23 · answer #1 · answered by ninasgramma 7 · 0⤊ 0⤋
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2016-07-22 00:44:35 · answer #2 · answered by Meredith 3 · 0⤊ 0⤋
If you file a joint return, the 2% AGI limit is the total AGI on the return, from both people's incomes. When you have expenses that are limited by AGI, it's possible although not for sure that you might do better filling as married filing separately - then you only use the income from that person, the income on that return.
Be very careful that she meets all the rules for a home office deduction as an employee - this is a hot button for triggering an audit. Check it out carefully before taking the deductions.
Expenses paid in 2006 can only be deducted on a 2006 return. You can amend your 2006 return and take them if it's enough to be worth it.
2007-12-05 03:45:54 · answer #3 · answered by Judy 7 · 1⤊ 0⤋
States with income taxes generally use income sourcing. If the work is DONE in Mass, it's definitely Mass income.
While it's true that states like NY have been known to claim that if an employer in their state paid the money, then it's NY income--but that's their rational to tax more money, not less.
2007-12-05 04:38:47 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Judy is correct.
BTW, your "accountant friend" is a tax moron. Maybe he specializes in audits. Find a new one. And file that missing '06 MA return or amend the one you did file and include your wife's income.
2007-12-05 04:35:38 · answer #5 · answered by Bostonian In MO 7 · 2⤊ 0⤋
Judy is correct; if you file MFJ your combined AGI is what the 2% is based on.
I would add that any tax projections you do should also include an AMT analysis. 2% miscellaneous itemized deducitons are an AMT preference item.
2007-12-05 03:52:33 · answer #6 · answered by taxreff 7 · 0⤊ 0⤋
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2016-07-08 20:11:03 · answer #7 · answered by ? 3 · 0⤊ 0⤋