Home office deduction using simplified method & expensing of non-permanent office modification?
"Yes, you may deduct the cost of building the ""noise cancellation system"" :) sorry couldn't resist. But seriously, yes you can deduct it ONCE (unless you have more cost maintaining it) and its on line 19 (Repairs and maintenance) of IRS Form 8829."
On form 8829, line 20 you can list utilities paid for the home office. You have two choices: 1) You can list the entire amount under column (b) as an indirect expense. You will then get a deduction for the fraction of the amount based on what fraction of your home is an office. This makes sense if the service equally benefits your entire home. 2) You can compute the portion of the expense reasonably attributable to the business/office and list that amount under column (a). This entire amount will be deducted. Which option you choose depends on how well you think you can allocate the expense between your office and the rest of your home. For example, I have had to do this with electricity, but I specifically measured the electricity used by my office. If you think you can defend allocating a larger portion to the office, use option 2. If you would have paid the same amount even if you didn't have an office, it's hard to justify allocating more of the expense to the office than its portion of the home. If you opted for a more expensive service or otherwise incurred additional costs, it makes sense to allocate a higher fraction to the office and to calculate that yourself. However, if you are employed by a company that exists in a tax haven and your services are provided to an employer by that tax haven company, it is the tax haven company that gets paid, not you. Under various schemes that company need not pay you at all. For example it may make you a loan which is not taxed (ie you don't pay tax on a loan, just as you don't pay tax on the money lent you by a mortgage company). You are bound by the terms of the loan agreement to repay that loan at a rate that the company finds acceptable. Indeed the company may find eventually that it is simply convenient to write off the loan as unrecoverable. if the owners/officers of he company write off your loans, how much tax will you have paid on the money you have had as   loans? The taxman can of course state that this was simply set up to avoid tax (which is illegal) so you should have a balancing scheme to show that that the loans were taken to supplement income,just as one might take a bank loan / mortgage, not replace it entirely as a tax scam. Hiring tax counsel to provide this adequate proof to HMRC has a price.  Frequently this kind of loophole exists because the number of people using it were sufficiently low not to warrant policing ( if the policing costs more than the tax recovered, then it is more efficient to ignore it) or because at some stage the scheme has been perfectly legal (as in the old offshore'education' trust recommended by the government a few decades ago). When Gordon Brown set out a 75% tax rate (for his possibly ideological reasons rather than financially based ones)for those who had these accounts , he encountered opposition from MPs who were going to be caught up paying high tax bills for what was effctively retrospective taxation, so there was a built in 'loophole' to allow the funds to be returned without undue penalty.  If you think that is morally wrong, consider what the response would be if a future Chancellor was to declare all IAs the work of the devil and claim that retrospective tax would need to be paid on all ISA transactions over the last few decades.eg: tot up all the dividends and capital gains made on an ISA in any year and pay 40% tax on all of them, even if that took the ISA into negative territory because the value today was low/ underperfoming. Yet this has been sggested as a way of filling in the hole in the budget on the grounds that anyone with an ISA can be represented as 'rich' to a selected party of voters. "You will be filing the exact same form you've been filing until now (I hope...) which is called form 1040. Attached to it, you'll add a ""Schedule C"" form and ""Schedule SE"" form. Keep in mind the potential effect of the tax and totalization treaties the US has with the UK which may affect your filings. I suggest you talk to a licensed EA/CPA who works with expats in the UK and is familiar with all the issues. There are several prominent offices you can find by Googling." Your home doesn't belong to the partnership, it belongs to you. So you can (if qualified) deduct home office usage as a business expense on your individual tax return. Same goes to your partner. Similarly any other unreimbursed expense. "That wasn't an ""inheritance"" that arrived out of the blue and the ""bank"" contacted your girlfriend by email, was it? A UK tax code is basically an assessment of how much money you can earn in the UK before you have to pay tax on it - basically it's a coding for a tax allowance and as a UK tax payer HMRC (the UK version of the IRS) gives you one for free. If your girlfriend is not a UK tax payer she should get the necessary paperwork to show that she isn't, although I'm not sure if that's got any bearing on inheritance tax. There are no lawyers involved in that process normally, any appropriately accredited accountant can do that for you in the UK if you're not in the UK. When I had to apply for a change of tax status in the UK it certainly didn't cost me $9.6k to do so via my accountant there. In fact the whole thing cost a few pounds to pay for my accountant's time and that was it. In fact, that whole thing smells fishy to me as someone who used to live in the UK. Care to divulge the name and possibly address of the bank? Here's inheritance tax information straight from the horse's mouth. That should clear up any questions if your girlfriend is even liable for any inheritance tax in the UK in the first place. And then, given the sums involved, get the recommendation for a good lawyer and a good accountant in the UK (or an accountant who can recommend a lawyer) to make sure that that end of the transfer goes smoothly." lets sat If I buy a house on company's name, It will declared as expense and will deduct from profit. but I am not sure If I can rent it out as a IT LTD company. that's my questions. Buying a house is not an expense, it is a transfer of assets.  The house itself, is an asset.  So if you have $100,000 in cash, buy a house for $35,000, your total assets will remain the same ($100,000), but your asset mix will be different (instead of $100,000 in cash, you now have $65,000 in cash, and $35,000 in property). You can expense the costs associated with buying the house (e.g. taxes, interest, legal fees), but the house itself stays on the asset side of your balance sheet.  To refine the example above, if you buy the house for $35,000, and pay $5,000 in misc fees related to purchasing the house, your assets are now $95,000 ($60,000 in cash, $35,000 in house): the $5,000 reduction is from the actual fees associated with the purchase.  It is these fees that lower your profit. Being not familiar with UK rules, in Canada and the US, and likely the UK, you would then depreciate the house over its useful life.  The depreciation expense is deducted from your annual net income. If you rent out the house, what you can do is expense any maintenance fees, taxes, etc., on the house itself.  This expense will count as a negative towards the rental income, lowering your effective taxable income from the rental.  E.g. rent out a flat at $1,000/month, but your property taxes are $3,500/year, so your net income for tax purposes (i.e. your taxable income in this case) is $12,000-$3,500=$8,500. I believe so (that you can, not that you are greedy) I run my own business and, generally speaking, am 'charging' my company 40p per mile as per the quote above. I did not know about the ability to claim the shortfall, as it is not relevant to me, but it makes perfect sense and I'm sure that a phone call to HMRC will help you understand how to claim.  As for the greedy question - personally I think that laws are there for a reason (both ways) so if there's money to be claimed - there's no reason not to do so, unless of course the hassle is greater than the potential gain. One last note - not sure exactly what the rules around this are, but I know that the allowance is not applicable for one's general commute and so if you're travelling to the same place over 40% of the time for more than two years you are no longer allowed to claim these miles. This answer is assuming you're in the US, which apparently you're not. I doubt that the rules in the EU are significantly different, but I don't know for sure. In case of an IRS control, is it ok to say that I regularly connect   remotely to work from home although in the work contract it says I   must work at client's office? No. Are there any other ways I can prove that this deduction is valid? No. You can't prove something is valid when its not. You can only deduct home office expense if it is used exclusively for your business, and your bedroom obviously is not. I know a guy on a much higher rate than me, about £500 per day, and he claims to pay around 18% tax which has me bewildered He will be showing expenses, which are deductible. Check with your accountant about expenses, which can be legally claimed as expenses. This is the main benefit of operating through a limited company. Legtimate business expenses can be claimed, which you cannot do if you are a permanent employee. Your friend might also be claiming false expenses, with a shady accountant. If HMRC does decide to give a call, he might have to pay n times the money he has saved till now. And my suggestion is always ask your accountant first. He(she) knows the legal stuff, so he(she) would give you the legally correct options. If you aren't comfortable with him(her), you can always change accountants. holiday pay, sick pay and job security You miss those that is why you are paid at a rate much higher than an employee.  benefit of a limited company  You can arrange your salary to pay no PAYE and take the rest as dividends. You willn't have to pay PAYE on that. Secondly if you have a partner(s), all of you can be paid dividends without paying PAYE(if you don't cross the threshold). With a question like this you should talk to a tax professional who knows about international tax and knows about both the UK and the country you will be working in. They will give you up to date advice on what can be an extremely complex question. However to get you started I'll tell you what I was told when I did this nearly twenty years ago. It's all about whether you are resident in the UK for tax purposes or not. If you are, you will pay UK tax. If not, you wont (assuming you are being paid outside the UK - check with your professional exactly what is involved). In those days you could be counted as 'non resident' if you spent a complete period of twelve months outside the UK. You can make occasional visits to the UK without invalidating that. Again, check exactly how much you are allowed to return while still being not resident. Usually you will have to pay tax in the country where you are resident, but check the rules there. With some skilful timing you may be able to be considered non-resident in bouth countries, at least for some of the time. Again, your tax professional will know. The bank account question - again get a professional. I don't think it's a problem, but you may have to establish that you are being paid in the foreign country. In general you are going to need an account in the country where you work, so if its a problem get paid there and transfer any money you need in the UK. "If you are not taking any of the options in the Flexible Benefit Plan, then everything is taxable. Check about ""Retirals"", the practise differs from organization to organization. Some pay it out annually and some only pay on completion of certain duration on exit. So Deduct 47K from 7 lacs. Gross of around 653,000. Total tax for this around 53,000. After tax yearly around 600,000. Individual contribution to PF@ 12% of basic around 33,600. Net Yearly around 567,225. So net take home would be around 47,268. You can easily take items 3,6,7,8 around 62,400. Thus you will save tax of around 13,000. So take home will increase 1,080." After talking to two CPAs it seems like managing it using an imprest system is the best idea. The base characteristic of an imprest system is that a fixed amount is reserved and later replenished as it runs low.  This replenishment will come from another account source, e.g., petty cash will be replenished by cashing a cheque drawn on a bank account. Petty cash imprest system allows only the replenishment of the spend made. So, if you start the month with €100 in your petty cash float and spend €90 of that cash in the month, an amount of €90 will be then placed in your petty cash float to bring the balance of your petty cash float back to €100. The replenishment is credited to the primary cash account, usually a bank account (Dr - Petty Cash a/c, Cr - Bank a/c) and the debits will go to the respective expense accounts, based on the petty cash receipt dockets (Dr- Expense a/c, Cr - Petty Cash a/c). In a non imprest system where a fixed amount is issued every month, e.g., €100 every time cash is required, there is no incentive to ensure all money issued has been documented because when money is all spent a check for a fixed amount is issued. It is much more difficult to reconcile a non imprest system as you never know how much exactly should be in the float. In an imprest system the amount requested is documented, the documentation being the petty cash dockets and their associated receipts or invoices. So at all times you can check how much should be left in the petty cash float by deducting the amount spent from the opening petty cash float. "In the US, you'd run the risk of being accused of fraud if this weren't set up properly.  It would only be proper if your wife could show that she were involved, acting as your agent, bookkeeper, etc. Even so, to suggest that your time is billed at one rate but you are only paid a tiny fraction of that is still a high risk alert.  I believe the expression ""if it quacks like a duck..."" is pretty universal. If not, I'll edit in a clarification.  note -I know OP is in UK, but I imagine tax collection is pretty similar in this regard." "Rob - I'm sorry your first visit here has been unpleasant.  What you are asking for is beyond the capability of most software. If you look at Fairmark.com, you find the standard deduction for married filing joint is $12,200 in 2012, and $12,400 in 2013. I offer this anecdote to share a 'deduction' story - The first year I did my MIL's taxes, I had to explain that she didn't   have enough deductions to itemize. Every year since, she hands me a   file full of paper substantiating medical deductions that don't exceed   7.5% of her income. In turn, I give her two folders back, one with the 5 or so documents I needed, and the rest labeled ""trash"". Fewer than 30% of filers itemize. And a good portion of those that do, have no question that's the right thing to do. e.g. my property tax is more than the $12K, so anything else I have that's a deduction adds right to the number.  It's really just those people who are at the edge that are likely frustrated. I wrote an article regarding Standard Deduction vs Itemizing, in which I describe a method of pulling in one's deductible expenses into Odd years, reducing the number in Even years, to allow a bi-annual itemization. If this is your situation, you'll find the concept interesting.  You also ask about filing status. Think on this for a minute. After pulling in our W2s (TurboTax imports the data right from ADP), I do the same for our stock info. The stock info, and all Schedule A deductions aren't assigned a name. So any effort to split them in search of savings by using Married Filing Separate, would first require splitting these up. TurboTax has a 'what-if' worksheet for this function, but when the 'marriage penalty' was lifted years ago, the change in status had no value. Items that phaseout over certain income levels are often lost to the separate filer anyway. When I got married, I found my real estate losses each year could not be taken, they accumulated until I either sold, or until our income dropped when the Mrs retired.  So, while is respect your desire for these magic dials within the software, I think it's fair to say they would provide little value to most people.  If this thread stays open, I'd be curious if anyone can cite an example where filing separately actually benefits the couple." For stocks, bonds, ETF funds and so on - Taxed only on realised gain and losses are deductible from the gain and not from company's income. Corporate tax is calculated only after all expenses have been deducted. Not the other way around. Real estate expenses can be deducted because of repairs and maintenance.  In general all expenses related to the operation of the business can be deducted. But you cannot use expenses as willy nilly, as you assume. You cannot deduct your subscription to Playboy as an expense. Doing it is illegal and if caught, the tours to church will increase exponentially. VAT is only paid if you claim VAT on your invoices. Your situation seems quite complicated. I would suggest, get an accountant pronto. There are nuances in your situation, which an accountant only can understand and help.