Newport Beach CPA Accounting Firm

Home Office Tax Rules

Home OfficeThere was a time that determining the correct deductions for your home office was complicated and could lead directly to an audit. Luckily, those days are in the past. The IRS no longer considers a home office a red flag, and they have found ways to simplify the process of taking this deduction.

Before 2013, business owners that worked out of their home were required to determine the actual expenses of their home office. This could include items such as utilities, insurance, and mortgage interest. The amount that could be deducted as a business expense was determined by the percentage, of the total square footage of your home, that was used for office space, but in 2013 that all changed.

For taxable years of 2013 and beyond, the IRS has introduced a simplified option. This allows business owners to multiply a prescribed rate by the square footage of the home that is being used as office space to determine the allowable deduction.

This change permits business owners to reduce the need for recordkeeping as actual expenses no longer need to be tracked.

There are two requirements that a business owner needs to meet to be eligible for the home office tax deduction. First, the area of your home that is used for your office must be used exclusively for conducting business. That means a kitchen table is not a home office, but if you have a room in your home that you use for office space exclusively, that would qualify.

Secondly, your home office must be your principal place of business. That doesn’t mean you can’t have an office elsewhere, but you need to be using your home office for meetings with clients, or some other activity that would suggest it is not simply an area that you work in from time-to-time.

If you have a home office, don’t hesitate to take the deduction you are entitled to. With the simplified option to determine your deduction, this is one time the IRS has made it too easy to pass up.

Morey and Associates CPA is a Orange County CPA Firm with offices in Newport Beach and San Clemente.  Our services are designed to minimize your tax liability within the legal limits for business owners and high networth individuals.  If you would like help lowering your tax liabilty, call us at 949-759-5626 and ask for Jerry Morey.

 

What is a 529 College Savings Plan?

College Savings PlanToday saving for college is more critical than ever before. Tuition and fees are already at all-time highs and the cost is only looking to increase in coming years. The 529 college savings plan is one of the most effective methods for parents interested in investing for their children to go to college.

529 college savings plans allow families to set aside funds for their children to go to college. Most states have at least one plan available, though each individual state offers different features and benefits to the plans they offer.

Why invest in a 529 college plan?

As long as the plan in your state follows certain federal guidelines, parents who invest in a 529 college savings plan are eligible for certain federal tax benefits. Depending on the plan you purchase and the state where you live, you may also qualify for tax benefits on the state level too.

The ultimate benefit, though, is the ability to help your child afford a college education, despite the exponentially rising costs of doing so.

Other benefits with this savings plan for college are that there are no income or age restrictions or limitations. The accounts require little maintenance activity and they are quite flexible.

Chances are good that you have questions about 529 college savings plans and whether they are the right choice for your child’s educational needs. Consult us today to learn more about your college savings options and what a 529 plan can mean for your child’s future.

If you are concerned about saving for college, call our office.

Morey and Associates is a licensed CPA Accounting Firm serving Orange County.  We have offices in Newport Beach and San Clemente.

Protecting Your Assets

A comprehensive estate plan should accomplish far more than just deciding who will receive your estate property after your death. Because of the unique nature of estate planning, the additional goals you include in your plan will depend on your needs and concerns. Asset protection, however, is a popular component included in many estate plans. A better understanding of what is meant by “asset protection” may help you decide whether or not it should be included in your estate plan.

If you have worked hard, saved frugally, and invested wisely over the course of your lifetime you undoubtedly want to protect the assets you have amassed as a result. Whether you realize it or not, your assets could be at risk in a number of ways, including:

  • Creditors – creditors of yours as well as of beneficiaries can attach assets to an unpaid debt.
  • Spendthrift beneficiaries – a “spendthrift” beneficiary can quickly deplete assets that are gifted outright to the beneficiary.
  • Divorce – you may have considered the impact of your own divorce on your assets but have you considered what the divorce of a beneficiary can do to gifted assets?
  • Bankruptcy – likewise, a beneficiary’s bankruptcy can mean a loss of gifted assets if the asset is not protected from bankruptcy proceedings.
  • Medicaid eligibility – statistically speaking you stand about a 50 percent chance of needing to qualify for Medicaid during your “golden years” to cover the high cost of long-term care. To qualify you may first be required to “spend down” your own assets, resulting in the loss of your life savings in a matter of months.

Proper estate planning can dramatically reduce, if not completely prevent, the loss of estate assets. A well drafted trust agreement, for example, can protect assets from creditors, beneficiaries, divorce, and bankruptcy. Likewise, the incorporation of Medicaid planning techniques into your estate plan early on will ensure Medicaid eligibility without the loss of valuable assets should the need arise during your retirement years.

At Morey and Associate CPAs, we help our clients protect their life long accomplishments.  If you’d like to discuss your situation, simply call 949-759-5626 or 949-485-2011 and ask for Jerry.

Morey and Associates has convenient locations in Newport Beach and San Clemente CA.  As part of our practice, we work with successful entrepreneurs, small business owners and high net worth individuals.