10 TOP TAX SAVING TIPS FOR 2025

1) ACCOUNTABLE PLAN FOR HOME OFFICE

During the 2025 tax season, we will share with you some tax-saving tips that may help you (and your family) keep more of what you've earned.

Today, we'll talk about the Accountable Plan for Home Office Deduction. It is a valuable tool for businesses to reimburse owners, shareholders, and employees for business expenses, including home office expenses. This is especially beneficial for corporations and LLCs treated as corporations, which cannot claim home office deductions directly.

Key Features of an Accountable Plan for Home Office

Requirements

To qualify as an accountable plan, three main rules must be followed:

  1. Business Connection: Expenses must be work-related and incurred while performing services as an employee.

  2. Proof of Expenses: Employees must provide documentation such as receipts or invoices within a reasonable timeframe.

  3. Return of Excess Reimbursements: Any overpayments must be returned to the employer.

Eligible Home Office Expenses

An accountable plan can cover various home office expenses, including:

  • Rent or mortgage interest

  • Utilities

  • Insurance

  • Repairs and maintenance

  • Office supplies

Implementing an Accountable Plan

Creating the Plan

While not required to be in writing, a written accountable plan should include:

  • A list of reimbursable expenses

  • Timeframe for expense reporting

  • Maximum reimbursement limits

  • Process for requesting reimbursement

  • Procedure for returning excess reimbursements

Calculating Reimbursements

For home office expenses, reimbursements can be calculated based on the percentage of space used for business.

For example, if the home office occupies 10% of the total home area, 10% of rent or mortgage interest could be reimbursed.

Tax Implications

Reimbursements under an accountable plan are not considered taxable income for the employee and are deductible as business

expenses for the company. This provides a tax-efficient way to compensate employees for home office use.

Benefits of an Accountable Plan

  1. Tax savings for both the business and employees

  2. Allows corporations to indirectly benefit from home office expenses

  3. Provides a structured approach to expense reimbursement

  4. By implementing an accountable plan for home office expenses, businesses can ensure compliance with IRS regulations while providing valuable benefits to their employees and optimizing their tax situation.