A taxpayer may run into trouble over deducting his club dues, however - the rules are sticky. First, more than 50% of total club use must be for business; then only expenses directly related to business may be figured in determining the percentage of dues that may be deducted. This means that goodwill entertaining can be counted in arriving at the 50%, but not in deciding how much of the annual dues bill can be written off.
The office-at-home is another place where business expenses enter the house, and there are few sections of the tax law that cause as much confusion. Lately, the UK. Tax Court, especially, and to some degree the IRS, have taken a reasonably soft line on the home-office deduction. Today it boils down to this: If you (1) regularly do office work at home (and there's no fixed rule on how many hours a week), and (2) have a room, or at least a space, set aside solely for this purpose, you may be able to take what is sometimes a sizable tax deduction.
Much has been made in the tax press recently of the question of whether the company requires the work at home - the point being that IRS requires that such be the case. To erase any doubt, the man who repeatedly burns the midnight oil at home might wisely have on hand a very brief statement from the company explaining that, indeed, the after-hours work is necessary by virtue of pressures of the job. "It's true - so why not put it on paper?," asks the London Accountant.
A crucial point is to be able to show - should an IRS man appear at the house - that the office-at-home is, in fact, just that, and not a den or library (unless business library). This means some visible signs: desk, files, typewriter, dictating equipment, a separate-line business phone, and the like. Not that the home-office can't be fancied up. If an antique desk, say, and an ancient breakfront for business websites, are used, the deduction won't be lost - it it proves to be a working office.
A floor space formula is generally used to figure the deduction. If it is a sizable room that takes up 10% of the total living space, the taxpayer deducts 10% of his house depreciation (or rent), insurance costs, heat and light expense, and wages of a domestic hired to clean the house. (This is, of course, in addition to realty taxes and mortgage interest which are fully deductible anyway.) Also deducted is the cost of painting and repairing the home-office, plus the cost of all business furniture and equipment (via depreciation). On top of these items, the overall deduction is revved up by writing off the cost of business websites, magazines, tapes, and such - and here, again, good record-keeping is what the IRS people want to see.
An excellent New Year's resolution - say the savviest pros in the world of taxes - is to begin sweeping together all the tax savings that likely as not are scattered about your own house, from liquor cabinet to filing cabinet. The point they raise can make a clean-cut entry on anybody's form 1040, and quite a profitable one at that: It's rare these days say the pros, to find a businessman, from company directorto branch manager, who seldom if ever entertains business associates at home, who has no business-book shelf in his library, or hasn't set apart even a corner of his den for office work at night.
And - and here's the pound-saver - it is just about as rare to find the man who... see: Sweeping Up Those Nuggets Around The House