You can’t deduct housing for a garage sale as you claimed.

Your own link says that I can, especially when you get around to acknowledging that the garage sale was just one small business activity of the whole business I described. I included “online retail” as an additional business activity specifically because I thought you would have a problem with the garage sale alone. I’ve already addressed your “garage sale” concerns; I addressed them before you raised them. Your own link says I can deduct from my housing costs the percentage of the house I use for business purposes. It specifically says I can use any “reasonable method that accurately reflects your business-use percentage” to make that determination.

They specifically say you can’t deduct even if the employer doesn’t reimburse.

The IRS basically acts as though your regular pay specifically includes reimbursement for your regular commute. Your regular commute is already paid for with your pay, which is why you can’t claim it. The pay you negotiate with your W2 employer already includes (but does not specifically itemize) reimbursement for your regular commute. That is why you don’t get to separately deduct it.

Your regular pay does not cover atypical travel. If you are temporarily forced to drive 5 miles further to a different job site, you can claim that additional 5 miles. Compensation for that additional mileage is not included in your regular pay. If that additional mileage is not specifically reimbursed, you can claim it, even as a W2 employee.

Companies do not offer that choice to everyone.

Then find a different company. Find three, or ten. You’re a contractor: you provide a contracted service, not your time. You provide it to anyone you want, not just a single company. That’s what it means to be a contractor, rather than an employee. You have the flexibility in defining exactly what business you will be doing. You don’t have to fit the narrow IRS restrictions associated with W2 employment. You operate as a business, and you are taxed as a business.

you claimed you could deduct part of your mortgage for a garage sale.

I claimed that a garage sale was a business activity. I said if you didn’t think an annual garage sale was sufficient to count as a “business”, you could engage in online retailing or other additional activities as well.

You absolutely are allowed to deduct the costs for that part of your home you use exclusively for business purposes. Right from your own link:

"Part 1—Part of Your Home Used for Business

Lines 1–3.

If you figure the percentage based on area, use lines 1 through 3 to figure the business-use percentage. Enter the percentage on line 3.

You can use any other reasonable method that accurately reflects your business-use percentage. If you operate a daycare facility and you meet the exception to the exclusive use test for part or all of the area you use for business, you must figure the business-use percentage for that area as explained under Daycare Facility, earlier. If you use another method to figure your business percentage, skip lines 1 and 2 and enter the percentage on line 3.

I’m beginning to get offended at the repeated insinuations that I am advocating fraud. You are looking at BUSINESS ACTIVITIES and declaring them to be fraud. You’ve adopted some sort of weird victim mentality here. You think that if “businesses” do it, it’s permitted by the government, but if you do the exact same thing, it’s fraud. It’s not.

Have you ever worked as a 1099 contractor? Have you ever had any income whatsoever that didn’t come from a W2 or capital gains? It really doesn’t seem like it. Your position on what constitutes a “business” seems to be some kind of megacorporation, rather than a sole proprietorship. You seem to be under the impression that unless you can survive off the income of your business, it’s not a business at all.

Fraud can be overstated deductions.

I never suggested overstating deductions. Your argument here is bordering on libelous.

Given that you aren’t allowed to deduct your mortgage for a garage sale,

Your own link says otherwise.

the amount of your phony deduction could be considered fraud.

There was no phony deduction.

You can’t deduct hobby expenses.

True, but I never suggested a hobby. I suggested a business. And I described numerous activities - not just a garage sale - that would constitute business. You consistently ignore the remainder of my argument: if you don’t think a garage sale is sufficient to constitute a “business”, you can engage in online retailing and other activities as well.

“Rent is high” you: “buy a house” “Police are corrupt” you: “become a policeman” “Tax policy is unfair” you: “start a successful business”

Your first two points don’t arise from any of my arguments. As for the third, I never said “start a successful business”. I’ve said repeatedly that 30% of home businesses never show a profit. They still get to deduct their expenses. Your third observation would be better stated as “Businesses get unfair tax breaks” : “Start a business, so you an claim the same tax breaks”

That’s not the discussion and you know it.

Actually, it is the entire discussion. The fact that the IRS requires your regular commute and other expenses to be included in your negotiated pay as a W2 employee means that your expenses are effectively considered “reimbursed”. Businesses don’t get to claim reimbursed expenses as deductions. If you don’t want to include such expenses in your regular pay, you can work as a 1099 contractor rather than a W2 employee.

You aren’t even googling before making shit up now.

Dude. You are clearly not understanding me. My statement - that you specifically quoted above - summarizes each and every point your link makes. You act like you’re disagreeing with me, but you’re supporting points I’ve already made. The disagreement you are having on this issue is entirely within your own head.

For example, from your link:

If the IRS believes you have erroneously claimed a home office or other deduction, it can ding you for anywhere between $500 and $5,000. This penalty can jump to 75% if the taxpayer deliberately and fraudulently attempts to reduce their tax liability.

My previous statement (Emphasis added):

They may not allow you to claim it as a business expense, but they can’t argue fraud unless you used it for personal use despite claiming business. So don’t do that. Don’t use it for personal use when you claim it as a business use.

Your link is just quantifying the penalties for ignoring my advice. Don’t “erroneously claim a home office or other deduction”. Go ahead and claim them, just make sure your claim isn’t erroneous. You are perfectly entitled to make a valid claim.

I’m entering this from the assumption that you are steering the argument into something completely unrelated because you were proven wrong.

That might just be a piss-poor assumption. You should probably go back and see if that assumption is actually justified. (Narrator: It wasn’t.)

IT DOESN’T MATTER IF YOU CAN LEGALLY DODGE TAXES BY RUNNING A BUSINESS. THE OP STATED THAT W2 EMPLOYEES DON’T GET THE DEDUCTIONS OF A BUSINESS.

This would only be a valid statement if “being a W2 employee” precluded the individual from also running their own business. As the employee is not precluded from running a business, the W2 employee can get the deductions of running a business. You have no grounds to say that they can’t get the deductions of a business, when they can, in fact, get the deductions of a business simply by operating as a business.

Perhaps it would be useful to show you that a business is not always entitled to deduct something. For example, where a business (subcontractor) is hired by another business (prime contractor) and that prime contractor provides various direct compensation to the sub, the sub cannot deduct the expense in question. The subcontractor is, effectively, an employee of the prime contractor, even though both are businesses. Expenses made by the prime cannot be deducted by the sub. Remember that.

If the prime contractor provides eye protection and other PPE to the subcontractor, the subcontractor cannot deduct that PPE as a business expense. If the prime contractor provides transportation to and from the main job site, the subcontractor cannot claim transportation costs.

When you cannot claim your commute costs as a W2 employee, it is because the IRS requires those costs to be included in your negotiated direct compensation with your employer. Your pay specifically includes compensation for your normal commute. You are “reimbursed” for your normal commute costs, and don’t get to claim them yourself.

As a W2 employee, you can claim transportation costs to other job sites unless you are specifically reimbursed for your travel to those other job sites. If you are reimbursed, you don’t also get to claim it. Your employer gets to claim that reimbursement as a deductible expense.

If you don’t like that, don’t work as a W2 employee. Work as a contractor: a business. A contractor is allowed to deduct the expense of all non-reimbursed transportation costs, and is not expected or required to demand explicit reimbursement for transportation or other expenses in their negotiated fee.

Gigantic deductions with no income would have them charging you with tax fraud.

Tax fraud would be claiming deductions for expenses that were never incurred. The expense of “rent” was incurred. The expense of “posterboard” was incurred. The expense of “balloons” was incurred. Using your attic for something other than storing items you retail in your online store and garage sale would turn your claim into fraud, but I never suggested you should do anything like that. That you attempted to sell everything in your attic indicates it was not used for personal use. They may not allow you to claim it as a business expense, but they can’t argue fraud unless you used it for personal use despite claiming business. So don’t do that. Don’t use it for personal use when you claim it as a business use.

You can’t get away with deducting your mortgage as a business express from a unprofitable garage sale.

I didn’t say deduct your entire mortgage. You can’t do that, unless you use the entire home exclusively for business. But you certainly can deduct a part of your mortgage, a part proportional to the amount of your house you use exclusively for business.

So we are back to, “just buy a house if you can’t afford rent.”

What are you talking about? That doesn’t make any sense whatsoever, and it certainly doesn’t arise from my arguments.

Look, you’re entering into this from the assumption that I’m suggesting you defraud the government. That is completely untrue. What I am saying is that “business” is a much broader category than you seem to think. A garage sale can certainly be a business activity. Re-selling merchandise online can certainly be a business activity. There is no explicitly defined line on how many business activities you need to perform, nor a explicit time period in which you need to perform them in order to consider yourself a business. As long as you approach it with the intention of (eventually) becoming profitable - even if you can’t figure out how to do that right now - it is a business, and you are entitled to claim it as such.

It is the epitome of foolishness to conduct business activities without declaring them to be “business”.

I haven’t addressed that issue. I’ve addressed the fairness issue. If you can present your expenses as business expenses, you should. If the only reason you can’t is because you aren’t presenting yourself as a business, present yourself as a business and take the deductions.

And your “garage sale tip” is bullshit of the highest order.

I completely agree. It is bullshit of the highest order. There is a special IRS term for “bullshit of the highest order”. That term is “business”.

If you’ve done it, you are lucky you haven’t been audited.

If I had done that, and I was audited, and the IRS had a problem with it. I’d owe what I would have owed anyway. Maybe with a small penalty.

You can’t deduct on a loss every year without being classified as a hobby.

How many companies do you need me to name, and how many years do they need to show losses? You certainly can show several consecutive years of losses. You’d be hard pressed to find a company that hasn’t shown many consecutive years of losses. Lack of profit doesn’t mean a business is unsuccessful. It means they paid out their vendors and workers and creditors a bit more than they brought in.

And why do you assume you will always show losses? Why do you assume you won’t find a profitable niche in the process? The only requirement the IRS needs to classify you as a business is the fact that you don’t make an assumption like that. That assumption is what makes it a hobby. Don’t make it, and you’re a business.

Sigh.

Forget about all of your W2 earnings for a moment. Forget about the 8.5 hours a day you spend working for someone else. Forget about your bi-weekly paycheck. None of that stuff matters here, or to the IRS.

Forget all of that, hold an annual garage sale.

Now, you’re a business. You get to deduct the poster board you purchase advertising your sale. You get to deduct the balloons and price stickers.

You also get to deduct that part of your rent or mortgage that you spend on the garage where you keep your inventory. That is now your “warehouse”, which is part of your (non-employment) business. How about your attic? The attic is part of your home. You pay mortgage/rent/taxes on that part of your home right along with every other part. I doubt you use it for anything but storage anyway. Put the crap in your attic on your lawn with a price tag once a year, and you get to deduct the part of your housing payment that goes toward your attic.

You get to deduct the cost of acquiring your inventory. That is also a business expense.

Spend an afternoon in a lawnchair while your neighbors look through your junk inventory, and you get to claim thousands of dollars in business expenses.

If you’re worried the IRS might take issue with you if you only do this once a year, you can put up an ebay, etsy, craigslist, or marketplace listing, and it becomes a year-round operation. You are now an online retailer, and your annual garage sale is just a clearance sale for that business. If you’re still not sure, you can file paperwork with the state to be able to collect sales tax (and deduct the filing fee as a business expense).

You can’t say, employee taxes aren’t unfair, just be an employer. It’s ridiculous!

I absolutely can, and it’s not ridiculous at all. The problem you’re having here is that you think you need to be Walmart in order to call yourself a business. You don’t. You think you need to generate a profit to be a business. You don’t. (You do need to try to generate a profit. But, very few businesses are actually able to successfully generate a profit, and yours doesn’t need to be successful either. “Trying” is enough.) I am quite confident that many of the things you do in your day-to-day life can already be categorized as “business”, or could be considered a business with slight tweaks. You are legally entitled to count expenditures on those activities as deductible business expenses.

It is possible but probably expensive or hard or both.

You’d be surprised…

Well, what if it was live?

Now you’re getting somewhere!

Skip the sand and the UV and the snails. Definitely skip the fish pond… You don’t want anything in your drain going into a body of water with large vertebrates in it. You don’t want animals to be involved in the filtration process at all.

You want plants. Plants, and bacteria. You want to inject the water into a large patch of vegetation and topsoil, where friendly little microbes will consume all the biologically active material, leaving the ground water to percolate through biologically inactive, mineral earth and back into a deep, underlying aquifer whence that water originally came.

You’re inventing a “septic system”.

You’ll want two tanks. The first will allow solid materials to settle. Anaerobic bacteria will act on solid biomatter, breaking much of it up into soluble effluent. The effluent at the surface overflows into a second tank, where more settling and more bacteria continue to decompose it. Next, the water from the surface of the second tank overflows into a leach field, where perforated pipes release it into topsoil. Here, decomposition switches from anaerobic to aerobic, and the process is similar to composting. The subsurface compost becomes fertilizer to surface vegetation, and the remaining water percolates into the ground water, and ultimately, the aquifer.

You’d waste more water on those filters than you’d reclaim.

It is a lie to say “you could itemize” when the IRS specifically does not allow W2 employees to itemize rent, transportation, food, and entertainment.

You’re getting hung up on the categories. You don’t have to be just a W2 worker for someone else’s business. You can also be a contractor: you can be a business yourself. No, you can’t deduct that part of your subsistence you use for W2 employment or personal use. But, you can put yourself on the clock for your own business, and that business can deduct everything that any other business can do.

If you’re not deducting that part of your home, utilities, vehicles, electronics, tools, and equipment that you use for various business purposes, you’re doing something very wrong.

Your business doesn’t have to actually turn a profit. Legally, you have to try to turn some kind of profit, but you don’t have to actually succeed. 30% of home-based businesses never do.

A large part of my house is used exclusively for business purposes. I deduct that part.

I don’t do this myself, but businesses are allowed to compensate workers with, in part, housing. Your home-based business could deduct the housing it provides to workers, including yourself.

Rent alone

All you are telling me is that “rent” isn’t a deductible expense.

None of that changes the fact that if you have more deductible expenses than the standard deduction, you can claim greater than the standard deduction.

The standard deduction is ~$16,000 for a single person. Medical expenses are deductible. If they spend $32,000 in a hospital stay, they would be better off itemizing the whole deduction rather than taking only the standard deduction.

Of course, they aren’t obligated to itemize. They could just take the standard deduction and be done with it. That choice is available to them, foolish as it is.

Educational expenses are deductible. They can choose to spend much more than $16000 on school expenses, claiming much more than the standard deduction.

Again, what should and should not qualify as deductible, and the size of the standard deduction are completely separate questions.

Found Henry’s crypt.

It certainly depends on what you’re actually paying, yes. It’s very unlikely that your deductible expenses will be greater than the standard deduction. But, it is certainly possible under certain (rare) conditions.

No, that’s incorrect. I am very well aware of this. Businesses only have to pay sales taxes on purchases for which they are the end user. They’ll pay sales taxes on their office supplies and services provided to the business. But manufacturers do not have to pay sales taxes on the raw materials they purchase. Retailers do not pay sales taxes on wholesale purchases they make for resale. Only the end-user pays the sales tax on a purchase.

I work with a couple vendors that do not collect sales tax at all. They only sell B2B, and they only sell to businesses who provide them with a sales tax exemption certificate.

What you are describing is more akin to Europe’s VAT system. Still, under VAT, everyone in the chain pays VAT, and each vendor remits the collected VAT to the tax authority. But, the business-buyer reclaims that VAT from the tax authority if they are not the end-user of the purchased product. Everyone but the end user can reclaim their VAT payment.

Commuting to and from the job is an expense needed for work. You can claim that part of your non-reimbursed travel expenses to temporary work sites that exceed your normal commute, but you can’t claim your normal commute.

You cannot deduct your commuting expenses. Not gas. Not bus fare. Not parking.

Uniform items are deductible only of you don’t get a uniform allowance.

If they give you a $50/yr boot allowance, you don’t get to claim your $300 Red Wings. If you buy your own tools but your employer provides a (shitty, shared) set, you don’t get to deduct your tools.

But, this is all about W2 employment. In practice, the overwhelming majority of expenses you incur in the process of W2 employment are not actually deductible, because your employer is already taking the deduction.

But, if you are running your own home business, your usual workplace is your home, and you can claim transportation expenses anywhere you need to go for that business. You can deduct the use of a part of your home. You can deduct part of your utilities, your wardrobe, your tools. Even if your home business is one of the 30% that are operated at a loss, you can deduct the expenses incurred while doing business, and offset a part of your W2 income.

You can’t deduct personal expenses, but you absolutely should be operating a side business with its own deductible expenses. That side hustle will probably be operating at a loss, and that loss will offset your W2 employment income.

Transportation to the job,

Normal commuting expenses are not deductible. You can only deduct transportation expenses to work locations other than your usual workplace, and then only that part of your expenses that exceeds your normal commute.

You can itemize other “costs of earning [your] income”, but for most people, the standard deduction is substantially greater.

You definitely want to be operating some sort of home business on the side, even if you are employed. You don’t get to count employment-related expenses, but you do get to count expenses attributable to that separate business.

Most of us also pay a much higher proportion of our income in sales taxes. Businesses are exempt from such taxes; they are only paid by the end user.