THE FUTURE OF EFFICIENCY

by Mark E. Battersby

Whether running a pressure cleaning business from home or simply bringing work home, business owners can create a tax deduction for home office expenses. Even storing business records or supplies at home can mean a deduction, but the time to lock in and maximize that writeoff is now, not when the tax returns are being prepared.

While deductions for home office expenses aren’t available as an itemized personal deduction or to a business’s remote employees, selfemployed individuals, small business owners, and others who work for themselves can write off many of the expenses of maintaining a home office if they meet the requirements of the tax laws.

Exclusively Exclusive

The expenses of an office in the home, storing records, or even maintaining a separate structure for a home shop or office can qualify so long as the space is used “exclusively” for business-related purposes. In other words, the space must be an identifiable space that is not used for anything else.

Under the rules the space doesn’t have to be walled off, but it must be an identifiable space and it shouldn’t be intermixed with nonbusiness use. Fortunately the IRS’s “exclusive use” test doesn’t apply if part of the home is used to store supplies, inventory, or records.

When using the records, inventory, or supplies exemption, the space must be immediately identifiable as suitable for storage and the home must be the only fixed location of the pressure washing business to take advantage of this exception.

THE ROOF OF THE HOME OFFICE WRITE-OFF

The deduction for home office expenses is often overlooked because of the requirement that part of the home must be used as the “principal” place of business. In reality the home office only has to be used regularly and exclusively to administer or manage the pressure cleaning business— and substantial administration/ managerial activities aren’t to be conducted at any other fixed location.

That’s right, the home office or other space doesn’t really have to be the principal place of business in order to take advantage of the deduction for home office expenses so long as it is used only for business purposes. The space must be used exclusively and regularly for administrative or management activities such as billing clients, setting up appointments, or keeping books and records.

THE HOMEOWNER’S CONUNDRUM

Depreciation is the basis of the home office deduction for homeowners, meaning the tax “basis” of the home must be a known factor. The basis can be either the home’s fair market value at the time the home office use began or the cost of the home.

The total cost of the property must be allocated between the land and the buildings on it to compute the tax basis for depreciation. The tax basis is then multiplied by the percentage of the space used for the home office or storage to determine the amount that can be depreciated as a home office expense.

Keeping It Separate

The IRS reportedly treats any attached space—house or apartment—with a separate entrance as part of the house, not as a separate structure. However, using a separate, free-standing structure, such as a studio, barn, shop, or garage for business doesn’t mean that it must be the principal place of business in order to reap the deduction—so long as the structure is used only for the pressure washing operation.

That’s right, it is not necessary to meet clients or customers to make that separate structure the primary place of business in order to claim home office expenses. Of course, as mentioned, it must be used regularly and exclusively for business purposes.

Expenses related to a qualifying separate structure are deducted just as they would be for business space inside the main house or apartment. If the separate structure has its own utilities, they can all be written off.

PLANNING NOW CAN ENSURE AN UNQUESTIONED WRITEOFF FOR THE EXPENSES OF MAINTAINING A HOME OFFICE. FROM QUALIFYING EXPENSES TO CHOOSING THE RIGHT METHOD, THE SELF-EMPLOYED AND OWNERS OR OPERATORS OF PRESSURE CLEANING BUSINESSES CAN ENSURE MAXIMUM—AND LEGITIMATE— WRITE-OFFS OF HOME OFFICE EXPENSES. PROFESSIONAL GUIDANCE NOW, NOT MERELY AT TAX TIME, IS ADVISABLE.

WHAT’S DEDUCTIBLE?

A deduction for depreciation of the portion of the home used as an office or even pro-rated interest on a home mortgage aren’t the only expenses qualifying as home office expenses. Consider portions of amounts for the following:

• Rent

• Utility bills

• Homeowner’s or renter’s insurance

• Security

• Property taxes

• Repairs and maintenance

• Internet services

• Pest control

• Cleaning services and,

• Even a second telephone line Depreciation amounts for furniture such as desks, chairs, and other equipment such as computers and printers used exclusively in the home office qualify as home office expenses. But, expenses such as landscaping or lawncare and pool cleaning or maintenance do not qualify.

Faster Deductions

Don’t forget those expenses that can be written off rather than being depreciated over time. Office furniture, computers, and off-the-shelf software qualify for the first-year, Section 179 expensing deduction—at least those expenditures less than the 2024 $1,220,000 cap.

There is also the so-called “bonus depreciation” write-off that allows 80 percent of the cost of that home office’s depreciable assets to be deducted immediately.

Keeping The Irs Happy

Qualifying for the home office expense deduction doesn’t necessarily mean the majority of business activities must take place in the home office, rather only that the home office is used regularly and exclusively to administer or manage the business and that substantial administrative/ managerial activities aren’t conducted in any other fixed location.

Claiming the deduction for the expenses of maintaining a home office does not significantly increase the chance of being audited. Naturally, since it is all too easy for the IRS to question a deduction for home office expenses with a simple letter request, it is essential to keep good records. Keeping all receipts to have as backup proof in the event of an audit is a good policy. In fact, well-documented records of income and expenses down to the last penny makes even more sense in light of the IRS’s well-publicized increase in auditors and their list of potential audit targets.

Keeping It Simple

While keeping good records related to all transactions is important, it is also important when using the relatively new option for deducting home office expenses.

Since 2013, a simplified option can be used to compute the deduction for business use of the home. The simplified option for claiming home office expenses as a deduction requires knowing the square footage of the home office. This option does not change the requirement of who may claim to have a home office. It merely simplifies the calculation and recordkeeping requirements for an allowable deduction. With the simplified option, a standard deduction of $5 per square foot of the home used for business up to a maximum of 300 square feet is allowed. In exchange for this greatly simplified deduction and less recordkeeping, a lower deductible amount is usually the result.

Both the regular and the simplified method require using Form 8829 (Expenses for Business use of Your Home). Of course, unlike the regular method there is no depreciation deduction with the simplified method.

Further restricting the home office expense deduction, neither the simplified nor the regular, actual expense method deduction can exceed the pressure cleaning operation’s gross income. There must be income from the business to claim the home office deduction, and the deduction cannot create a loss that offsets other income. It is only with the regular method that a loss carryover is permitted.

When Stuff Happens

When a qualified home office is damaged or destroyed by a burglary or disaster such as a hurricane, flood, fire, accident, riot, or vandalism, a deduction may be possible to include some of those losses as part of the home office deduction.

If the loss occurs only to the home office, it is treated as a “direct” expense that is fully deductible. If it applies to the entire home, the loss must be allocated between the home office portion of the home and personal use portion. If the loss occurred only to the nonbusiness part of the home, it cannot be deducted as a business expense although it might be deductible as a personal expense.

For the record, casualty losses imply a sudden, accidental, or unusual loss. Casualty losses do not include damage from pets or progressive losses to property such as damage from erosion, termites or other insects, wood rot, or similar slow-moving causes.

The Early Bird Gets The Biggest Deduction

Using part of the home, apartment, or condominium “exclusively and regularly” in the pressure cleaning business can qualify for the home office expense deduction. In fact, these deductions are also available when a rented apartment or other leased property is used.

Running a pressure washing business or simply bringing work home can, as mentioned, qualify for a home office expense deduction. Even storing business records or supplies can mean a tax deduction.

Planning now can ensure an unquestioned write-off for the expenses of maintaining a home office. From qualifying expenses to choosing the right method, the self-employed and owners or operators of pressure cleaning businesses can ensure maximum— and legitimate—write-offs of home office expenses. Professional guidance now, not merely at tax time, is advisable CT

KLEEN-RITE MISSOURI MOVES INTO NEW DISTRIBUTION CENTER FACILITY

Kleen-Rite Corp., the largest familyowned car wash distributor in the country, has been a reliable supplier to the car wash industry for over 60 years. They are proud to announce the opening of a distribution center facility at a new location in Kansas City, Missouri.

Replacing the previous distribution center, the new facility has more space to stock an expanded inventory selection and ship products faster in the region. It also offers more convenient physical access, making it easier for customers to pick up their products on-site. This exciting move is an important part of Kleen-Rite’s ongoing commitment to constantly improving how they serve customers.

Renovation of the building is now complete, existing inventory from the previous building has been transferred, and all vendors have been alerted to ship future deliveries to the new facility. The same reliable staff is on hand to serve customers and ship product.

The old location will no longer be used by Kleen-Rite, so customers should take note of the new address. All correspondence and business matters for the Missouri region should be directed to this location:

Kleen-Rite Corporation 5121 E. Front Street Kansas City, MO 64120

Kleen-Rite encourages nearby car wash owners, detailers, and pressure washers to visit the new facility and looks forward to making this a key hub that ultimately benefits valued customers in the surrounding area.

Kleen-Rite can be contacted though their website at www.kleenrite.com or toll-free at 800-233-3873. CT

ZONE 1

American Waterworks, Inc. 13250 Weidner St. Pacoima, CA 91331 818-252-0706 www.americanwaterworks.net

Custom trailer system sales & service.

Nor Cal Pressure Washer Equipment

250-G S. Maple Ave. S. San Francisco, CA 94080 (866) 554-6601 www.norcalpressurewash.com

Hydro Tek Sales & Service, Industrial/Commercial.

Pacific Bay Equipment 609 G Street Modesto, CA 95354 (209) 578-3925/fax (209) 578-3120 www.pacificbayequipment.com

SF Bay area: 28301 Industrial Blvd. Hayward, CA 94545

ZONE 4

Pressure Systems, Inc.

1646 E. Jefferson Street Phoenix, AZ 85034 (602) 253-9579 www.pressuresystemsinc.com Experience Makes a Difference. Working With Water & Finding Solutions Since 1965.

Superior Cleaning Equipment

4422 E. University Dr. Phoenix, AZ 85034 602-257-1357 sceclean.com

ZONE 5

American Cleaning Systems 5261 W. 42nd St. Odessa, TX 79764 (800) 205-7797 www.amcleaning.net

Pressure Washers, Soaps, Degreasers, Hot Shot

Alklean Industries, Inc. 2111 Catalina Dr. Pasadena, TX 77503 (281) 479-5966 www.alklean.com

Hotsy, Mi-T-M, Hydro Tek, Alkota, KEW, Alto, plus many more. POWERWASH.COM 2313 Cold Springs Rd. Fort Worth, TX 76106 (800) 433-2113 www.Powerwash.com

Pressure Washer Sales & Service, Parts, Chemicals. River City Pressure Cleaning Equipment 7306 NE Loop 410 San Antonio, TX 78219

(888) 889-WASH (9274) www.rcpce.com

Industrial Pressure Washer Sales, Service, Parts, Detergents, & Diesel-Powered Equip. Available.

Sellers Sales Co. Inc. Pumps & Equip 1904 So. Loop Drive Waco, Texas 76704 (254) 754-5761 info@sellerspump.com

Cat Pumps dist for 50 years. Pump Sls/Parts/Repairs/Cstm Built Pump Pkgs

Zone 6

AaLadin Central Pressure Washers & Supplies 2339 East Front Street Kansas City, MO 64120 (816) 221-1007 www.aaladincentral.com

Aaladin Elite Dist. Sales, Service, Parts, Soap for all brands. Chappell Supply & Equipment

• CETA Certified Distributor 6509 W. Reno Ave. Oklahoma City, OK 73127 (405) 495-1722 service@chappellsupply.com 1-Stop-Shop for Industrial Cleaning Equip. Needs.

KO Pressure Supply 2950 E. Division

Springfield, MO 65803 (888) 301-3005 www.kopressuresupply.com

Quality Parts, Equipment, Chemicals, and Service.

ZONE 7

American Pressure, Inc.

• CETA Certified Distributor 3810 West Broadway Robbinsdale, MN 55422 (763) 521-4442 www.AmericanPressureInc.com

Parts/Repair/Equip-Contractor Discount-Huge Inventory

Omega Industries, Inc. 11317 W 47th St. Minnetonka, MN 55343 (952) 988-8345 http://omegaindustriesinc.com

Sayers Wash Systems 21020 Cambodia Ave. Farmington, MN 55024 (800) 456-9840 www.SayersWashSystems.com Servicing Virtually All Brands of Pressure Washers. ZONE 8

Michigan Power Cleaning 2101 Palmer Avenue, Kalamazoo, MI 49001 (269) 349-3656

MichiganPowerCleaning.com 35y+ Parts/Service Cat General Hydrotek and Other Brands. ZONE 9

Pressure Washer Supply Center 480 Hylton Rd. Suite D Richmond, VA 23238 804-708-9851 pressurewashersupplycenter.com

Commercial Pressure Washer Sales, Service, Parts, Chemicals & Repair.

Pressure Washer Supply Center 110001 Houser Dr. #13 Fredericksburg, VA 22408 (804) 708-9851 pressurewashersupplycenter.com

Commercial Pressure Washer Sales, Service, Parts, Chemicals & Repair. ZONE 10

Delco of Knoxville 6675 Clinton Hwy Knoxville, TN 37912 (865) 938-4486

Sales. Parts. Service. Rentals. Etowah Chemical Sales & Service

• CETA Certified Distributor 1706 Rossville Ave. Chattanooga, TN 37408 (423) 756-5763 www.etowahchemicals.com