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Market value is a common term used in value investing to describe how much a company or asset is worth on exchanges and financial markets. Essentially it is the value of a security in the eyes of market investors. Understanding the current standing of a business in its particular industry and the broader market is important when making investing decisions.

What Is Market Value?

Market value, also referred to as OMV, market capitalization, or “open market valuation,” is the price of an asset in an investment marketplace or the value the asset has within a community of investors. It is calculated by multiplying current share price in a marketplace by the number of outstanding shares. Read on to learn what market value is and how to calculate market value.

The market value represents the price that investors will pay for an asset, and therefore changes significantly over time. The more investors will pay for the asset, the higher the market value.

What investors are willing to pay depends on various factors, including the fundamentals of the asset itself, as well as the business cycle and current levels of demand for that asset. Market value could be anything from under $1 million for small businesses to more than $1 trillion for large corporations.

It’s easy to determine the market value of frequently traded assets (by looking at their current prices), but harder to determine the market value of illiquid assets, such as real estate or a company, that don’t trade very often. Market value per share is a company’s market value divided by its number of shares.

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Factors that Impact Market Value

Many factors determine market value, including a company’s profitability and its debt levels. Market value fluctuates significantly over time. Market values often move in tandem with the overall market sentiment.

During bull markets or economic expansions, market values often increase, and during bear markets they go down. Other factors influencing market value include:

•   The company’s performance

•   Long-term growth potential

•   Supply and demand of the asset

•   Company profitability

•   Company debt

•   Overall market trends

•   Industry trends

•   Valuation ratios such as earnings per share, book value per share, and price-to-earnings ratio (P/E ratio)

Earnings per Share

The higher a company’s earnings per share, the more profitable it is. A more profitable business has a higher market value, and vice versa.

Book Value per Share

Investors calculate a company’s book value per share by dividing its equity by its total outstanding shares. A company with a higher book value than market value may have an undervalued stock.

Price-to-Earnings Ratio (P/E Ratio)

Investors calculate P/E ratio by dividing a company’s current stock price by its earnings per share amount. A higher P/E ratio means a stock’s price market value might be high relative to its earnings.

💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.

How Is Market Value Calculated?

There are multiple ways to calculate market value. Here’s a look at a few of them:

Income method

There are two methods of calculating market value using income:

•   Discounted Cash Flow (DCF): To find discounted cash flow, investors project a company’s future cash flow and then discount it to find its present value. The amount it gets discounted reflects current market interest rates along with the amount of risk the business has.

•   Capitalized Earnings Method: With capitalized earnings, investors find the value of a stable, income-producing property by taking its net operating income over time and dividing it by the capitalization rate. The capitalization rate is an estimate of how much potential return on investment the asset has.

Assets Method

Using the assets approach, investors find an asset’s fair market value (FMV) by determining how many liabilities and adjusted assets a company has, including intangible assets, unrecorded liabilities, and off-balance sheet assets.

Market method

Using a market-based approach, there are a few more ways market value can be determined:

•   Public Company Comparable: This company compares similar businesses that are in the same industry or region and about the same size. Ratios like P/E, EV/Revenue, and EV/EBITDA can help compare all the similar companies.

•   Precedent Transactions: Using the precedent transactions method, market value reflects how much investors paid for other similar company’s stock in previous transactions. Investors can get a sense of how much a company’s value is by looking at similar companies.

Example of Market Value

Using the capitalized earnings valuation method, here’s an example of the market value calculation. The formula used when calculating via capitalized earnings is as such:

Market value = Earnings/capitalization rate

Earnings are rather self-explanatory, and the capitalization rate is the required rate of return for investors, a number reached by subtracting a company’s expected growth rate from the investor’s expected rate of return. For this example, we’ll make things simple and say that the capitalization rate is 10%, and the company’s earnings are $1 million

Using the formula: Market value = $1 million/10%

That calculates to $10,000,000.

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Limitations of Market Value

Market value is a very useful tool for understanding how much a company is worth and whether it is a good time to invest or sell its stock. However, it has a few limitations:

•   Fluctuation: Company stocks go up and down every day, and, therefore market value also always changes. Various factors affect market value, and it is very dynamic, which is important for investors to keep in mind when making trading decisions.

•   Precedent data: It’s easier to find market value for established businesses because it requires historical pricing data to find it. New businesses don’t have such data, making it harder for investors to determine their market value.

The Takeaway

Market value is very useful for analyzing a stock. It is easiest to calculate market value of assets such as stocks and futures that are traded on exchanges because it is easy to access their market prices. Market value for less frequently traded assets can be difficult and requires some assumptions and calculations.

Calculating market value can be useful for investors of all stripes, but it can be easy to get lost in the math. Be sure to double-check your math and consider the limitations of market value before making investing decisions.

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FAQ

Is market value the same as market capitalization?

Market value is the price at which a buyer purchases an asset, and can refer to a company or a security such as a stock, future, or asset. Market cap is the value of the total number of outstanding shares of a company, based on their current market value.

Is market value the same as book value?

Market value and book value per share, or explicit value, are different and can be very different amounts, but they are often used in conjunction by investors looking to gain an understanding of an asset’s value. Book value is the net value of a company’s balance sheet assets, while market value is the price at which a buyer purchases an asset.

Photo credit: iStock/SeventyFour

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Apache is functioning normally

For those who feel liberated by small apartment living but are having trouble strategically organizing in a way that makes your place feel tidy, this article is for you. Whether you just leased a Seattle apartment or are looking at apartments for rent in Naples, Florida, expert organizers offer their best insights to help you keep your belongings in order and readily accessible.

While the task may initially feel tricky, Barbara Metzel with Professional Organizing Plus says a small apartment requires “creativity and smart organization” influenced by a “minimalist approach.” Now, let’s get started.

1. Begin by decluttering 

Initiate your organization journey by decluttering. Streamline possessions and keep only what is essential. This foundational step sets the stage for an efficient and visually pleasing living environment.

Founder of Selma Organizer, Mariselma Goncalves, shares how “a great way to achieve serenity, especially in a small apartment where every inch counts, is by organizing and decluttering.”

The act of decluttering, however, isn’t done once and then forgotten about until the stacks pile up. In her blog, Tacoma, Washington’s professional organizer and owner of Clear Spaces Organizing Co., Ashley Nariman, shares how “the most valuable thing you can do is to develop a regular habit of decluttering.” She recommends “adding a purge session to your calendar every 4-6 months to keep clutter in check.”

By decluttering and “reducing the number of items in a space,” Aaron Traub, owner and lead organizer of My Professional Organizer Dallas, shares that a space can be “more functional and serene.”

2. Utilize clear containers

Opt for transparent storage solutions to quickly identify contents. Clear containers provide a visual inventory and lend a sleek and uniform appearance to your storage areas, maintaining a sense of order and simplicity.

Professional organizer Bethany Van Dyke shares how clear containers can be utilized in spaces such as kitchens or bathrooms “to house perishable food or bathroom items” that were previously in bulky packaging that took up unnecessary space.

Mary Beth Bartlett and Megan McDowell with Rooms to Breathe recommend “transferring board games and puzzles into zippered mesh pouches and filing in a large open bin” to save space. Additionally, the duo suggests to those with craft stations “unboxing markers, crayons, glue sticks, and other art supplies and putting them into a divided turntable.”

3. Vertical space

Unlock valuable vertical real estate by installing shelves and organizers on walls. Embracing verticality optimizes space utilization, freeing up floor space and allowing a visually striking display of your belongings.

Creative consultant and designer for Organize Create Design, Tracy Broeckel, shares how “floating shelves and pegboard paired with hooks and baskets can free up valuable floor space.” With Half Full Organizing, Stacy Stevens adds that implementing these items can “offer function and double as décor.”

Sarah Kary, certified professional organizer with From Mess to Blessed, shares how command hooks can be versatile in what they are used for. She adds that they are “renter friendly” and great for “hats, jewelry, kitchen utensils, stringing lights, dog leash, and art and décor.”

When organizing vertically, Taylor Miller, founder of Orderly Interiors, recommends investing in “behind-the-door storage shelves to neatly house laundry supplies, tools, bathroom essentials, or pantry items.” Heather Cocozza, organizing and productivity consultant for Cocozza Organizing and Design, recommends renter-friendly products such as Elfa Back of the Door Solution or iDesign Affixx Adhesive Organizer Bin for back-of-door storage.

4. Fold clothes

Master the art of efficient clothing storage by adopting the KonMari folding method. Neatly folded clothes save space, reduce wrinkles, and create an appealing wardrobe. This technique proves particularly beneficial in confined closets.

Certified professional organizer Katie McAllister with Susquehanna Closet and Garage Design shares how “jeans, athletic clothing, sweaters, scrubs, and t-shirts all do very well folded.” She also adds how the ideal spacing between shelves is 8-10 inches. This allows you to “stack a few items without creating your own Leaning Tower of Pisa.”

5. Under-the-bed storage

Transform the underutilized space beneath your bed into a storage powerhouse. Invest in under-bed storage bins or drawers that can be readily accessible but offer an organized space to stow away underused items. 

Deena McNichol, owner of One Thing at a Time Professional Organizing, shares how under-bed storage is great for items such as “shoes, linens, or sweaters.”

6. Integrate multifunctional furniture

Select furniture pieces with dual purposes to make the most of limited space. From ottomans with hidden storage to convertible sofa beds, multifunctional furniture adds versatility without sacrificing style, catering to both form and function in your compact abode.

Designer sales representative for Save Our Space, Cory Viereck, recommends that those limited in closet space add wardrobes that can fit their belongings.

Source: apartmentguide.com

Apache is functioning normally

Picture this: You wake up in the morning, filled with energy and excitement for the day ahead. But as you open your closet door, instead of being greeted by a neatly organized array of clothing, you’re met with a chaotic jumble of garments piled haphazardly on top of each other. Sound familiar? If so, you’re not alone. 

Many of us – from Miami, FL to Seattle, WA and anywhere in between – struggle with closet clutter, but fear not – organizing and simplifying your closet is easier than you think. In this guide, ApartmentGuide explores some expert tips and tricks for maximizing your closet space, streamlining your style, and simplifying your life in the process.

1. Declutter like a pro

The first step in maximizing your closet space is to declutter your space ruthlessly. Set aside some time to go through each item in your wardrobe and ask yourself: Do I love it? Do I wear it? If the answer is no, it’s time to say goodbye. Donate or sell items that no longer serve you, and watch as your closet breathes a sigh of relief.

Brenda Scott, professional home organizer and owner of Tidy My Space, weighs in on this topic. “Start by sorting through your outgoing seasonal items and weed out anything you didn’t wear or use; chances are you won’t next time either. Then, inspect all incoming spring items. Do they still fit well and make you feel confident? If not, consider selling or donating them, as others may be looking for new spring pieces.”

2. Start fresh

According to personal stylist Deni Kiro, spring is the perfect time to revitalize your wardrobe and embrace new trends. “Start by reviewing the latest fashion trends and selecting ones that resonate with your personal style. Decluttering your closet is essential for rediscovering forgotten treasures and making space for new additions. 

Consider refreshing old pieces with tailoring to breathe new life into your wardrobe sustainably. As you cleanse your closet, focus on identifying your favorite pieces and exploring fresh styling ideas. Take inspiration from fashion runways to discover innovative ways to combine colors and styles, igniting your creativity for the season ahead.”

3. Invest in smart storage solutions

“I firmly believe that spring presents the ideal opportunity to organize and declutter home wardrobe closets,” asserts Lisa Ann S. Santin, proprietor of LASS Wardrobe. “As we transition between seasons, decluttering our spring and summer closets and adopting a highly organized approach sets the stage for seamlessly integrating seasonal trends while also revitalizing forgotten pieces.”

Once you’ve cleared out the clutter, it’s time to invest in some smart storage solutions to make the most of your closet space. Consider adding shelves, drawers, or cubbies to maximize vertical storage. Utilize hanging organizers for shoes, bags, and accessories, and invest in slimline hangers to save space and keep your clothes wrinkle-free.

4. Get creative with clothing arrangement

Think outside the box when it comes to arranging your clothing. Rather than exclusively hanging garments, try folding bulkier items such as sweaters and jeans to maximize hanging space availability. Employ dividers or bins to categorize various types of clothing, facilitating quick and easy access to your wardrobe essentials. Additionally, make the most of the available space by utilizing the back of the door for supplementary storage options. Consider installing an over-the-door shoe organizer or hooks to optimize storage capacity, especially in compact or limited spaces.

5. Incorporate a seasonal rotation

With spring approaching, now is the perfect time to freshen up and organize your home,” advises Efa, professional organizer and founder of Neat It. “Begin by sorting through your summer wardrobe. If you find items that no longer fit or are worn out, consider parting ways with them. Clearing out unnecessary belongings not only creates space but also contributes to a renewed and orderly living environment, promoting a sense of well-being and anticipation for the season ahead.”

To prevent your closet from becoming overcrowded, consider implementing a seasonal rotation system. Store off-season clothing in bins or under-bed storage containers, and swap them out as the seasons change. Not only will this free up space in your closet, but it will also make getting dressed each morning a breeze.

6. Maximize every inch

Finally, don’t overlook any potential storage opportunities in your closet. Take advantage of high shelves for storing out-of-season items or infrequently used items like luggage or keepsakes. Make use of the floor space for shoe racks or storage bins, and don’t forget to utilize the space above the closet door for additional shelving or hanging space.

“Store your winter garments at the top or towards the back of your closet, or even pack them away if possible,” suggests stylist Suzie Gaffney. “Keep your spring and summer attire visible and within easy reach. Consider arranging your clothing by color to give your wardrobe a fresh perspective and ensure organization by grouping similar types of clothing together within each color category, such as white tanks followed by white short sleeves and then white long sleeves. This color-based system facilitates quick and efficient access to your wardrobe essentials.”

Maximizing your closet space this spring

With these straightforward strategies, you can turn your chaotic closet into a well-ordered space you’ll love. With just a bit of time and creativity, you’ll maximize your closet’s potential and make getting dressed each day a pleasure. So, roll up your sleeves, gather your bins and hangers, and get ready to conquer your closet clutter once and for all.

Source: apartmentguide.com

Apache is functioning normally

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A lot has been written about whether now is the best time to buy stocks.

Many think that it is a good idea, and others are still skeptical. So which one should you believe?

This article will help answer the question once and for all with facts rather than opinions.

But first, let’s look at some statistics:

  • S&P 500 Total Returns for 2021 was 28.71% (source)
  • In the past 20 years (2003-2021), the S&P 500 was down three times. (source)
  • Over the 10 year period of 2011-2020, the S&P 500 averaged 13.9% (source)

With that said, will it be best to invest now?

Honestly, that is an answer no one can give you. And the movies about Wall Street won’t help you either.

However, you can learn to read charts become a technical analysis trader, and have a better idea of where the market is going.

The stock market is a volatile thing. It can go up or down at any time. As the statistics show, it goes up more often than down.

Is it Smart to Invest in Stocks?

The stock market is a great way to make money whether for income or for long-term investments. Plus it is a lot more accessible than you think.

With stocks on an upswing lately, it might be tempting to dive in. But do not get too excited just yet!

You must learn how to invest in stocks.

Are you ready to make money in the stock market? If so, learn the steps to start investing today.

In order to make educated decisions, it is crucial that you understand what makes stocks go up or down.

Since you might be asking yourself whether it is a good time to buy stocks after the market has been on such an upswing for several months. The answer is yes, but there are some important factors you should consider before handing over your money.

This article will discuss how the stock market works and provide you with reasons why now may not be a great time to invest in stocks as well as alternatives that could make sense for you if this is indeed a bad time to purchase them.

Read more!

What is the Stock Market?

The stock market is a system of securities, such as stocks and bonds, in which investors buy and sell ownership stakes to each other on various exchanges using money or their own businesses.

Simply put, the stock market is a place where people invest money.

There are many different ways to invest in the stock market, but one of the most popular ways is through buying stocks.

Investing in stocks is a commonly used way to make money.

In the stock market, people can buy and sell shares of companies they believe will rise in value. You can participate by investing in the stock market by buying individual shares of a company like AMZN (Amazon), investing in an ETF like VTI, or investing with a mutual fund, such as VTSAX.

One former assistant principal, Teri Ijeoma, changed her life when she left her job as an educator and become an active trader.

What does it mean when the stock market is up or down

When the stock market is up, it means that stocks have been doing well.

Conversely, when the stock market is down, it means that stocks are losing value.

You have heard the saying… buy low, sell high.

Stocks are an investment that you can purchase in order to make a profit, but the best time to buy stocks is when they are at their lowest price.

If you bought a stock for $100 and its value increased by 10%, then your stock would be worth $110. However, if you bought 20 stocks at $100 and the value increased by 10%, then your new value is $2,200. If you are trading options, then your return (and risk) is much greater.

When the market is up or down there are always going to be opportunities to make money from the stock market!

The hardest part for the novice investor is to determine when to buy and sell.

Thankfully, there is a great investing course to help you figure out how to invest in stocks and options.

Timing the Stock Market

Can you even time the stock market?

Many people are concerned with timing the stock market because of its volatility. Honestly, no one knows what the stock market will do.

As a technical stock trader, you will learn based on previous actions how the market and individual stocks may react.

When day traders or swing traders “time” the market, they are using time frames to make their predictions. Those traders who manage their risk and potential losses well will do better in the market.

For the average investor or someone going off a friend or Reddit recommendation, timing the market can be detrimental to your portfolio.

The real answer to the question, “Is now a good time to buy stocks?” is that there’s no such thing as an ideal moment. It could be a great time or it could also be terrible timing. There are too many variables and market risks which makes this decision very difficult for investors.

Too many times, investors fall into the trap of panic selling while stock prices are low and buying when stocks are high on the fear of missing out (FOMO).

That is why the common knowledge states don’t time the market.

However, I can tell you that you can time the market. If (and it is a big if) you are willing to put the time and effort into an investing education as you would going to college.

Many people have found success in timing the market.

Why investing is always a good idea

Remember earlier in this post, we stated the stock market has averaged 13.9% over the past 10 years and only had 3 negative years in the past twenty.

Simply put, that means you can make money, and investing is a good idea.

That is better than the flip side of your money sitting in the back earning slightly above 0% and when you account for inflation, your money is worthless.

The stock market is (almost) always following an upwards trajectory.

This means investors are more likely to experience gains in their investments than they would if the prices were going down. Moreover, it’s almost never a good idea to just let your money sit doing nothing for years on end because inflation will eventually force you into losing value at some point.

Instead of waiting until then and hoping for the best, focus on what you want instead of what the market is doing at any specific moment.

Must Read: How To Invest In Stocks For Beginners: Investing Made Easy

Is now a good time to invest?

This is the wrong question. The better question to ask would be “What is a good time to invest?”

It is not always a good time to invest. Before buying stocks, it is important that you do your research and have a clear purpose for investing in the first place. Once you know why you are investing, then it will be easier to answer when now might actually be a good time.

What are your goals for investing in stocks?

  • Are you looking to make extra money?
  • Do you enjoy learning about the fundamentals of your favorite companies?
  • Do you have the time to invest to learn about investing in stocks and executing trades?
  • The desire to increase your investment accounts and net worth appealing?

If you answered yes, then you are ready to start investing in stocks.

If you said no, then stick to consistently investing in EFTs or mutual funds. That is still a solid investing strategy!

The bottom line is whether you are ready to invest. The stock market will continue to do its thing whether you choose to participate or not.

Why does the stock market just keep going up?

The stock market has been steadily climbing for the long trend.

As a result, it’s important to be aware of the factors that influence how much you can profit from stocks. This includes understanding what drives stock prices and when these markets are likely to go up or down.

The reality is that there is no such thing as an “always” in investing — there will always be downturns at some point for any market, but those dips won’t last forever either.

As history proves, the stock market over time will keep going up.

Why has the stock market dropped?

This is the #1 reason why most people are terrified of investing in the stock market.

The fear of the stock market dropping and losing money. Or maybe they were burned in the previous market corrections in 2001 or 2008.

Typically, the stock market has dropped because of the following:

  • The global economy is going through a rough patch.
  • There is fear that the US may be headed for another recession.
  • The US is experiencing inflation that has caused the Federal Reserve to raise interest rates.

In other words, investors are uncertain about the future of the global economy and are afraid of a recession in the US, which will have a significant impact on the stock market.

Just remember, the S&P 500 has come back each time after posting a year or two of negative returns.

However, you can still make money as an investor when the market goes down! Learn how to ride that elevator up and down.

What are the best times to trade stocks?

Ask a few different investment gurus and you are likely to get a variety of answers such as:

  • It is best to trade stocks when the market is down and on a day with low volume. This way, you are less likely to be hit with volatility that could cause your profits to drop.
  • The best times to trade stocks are when the market is stable, meaning that there are few fluctuations in price. The most optimal time to enter and exit the market is during a period of low volatility.
  • The best time to trade stocks is when the market is at an all-time high. (very wrong idea, so don’t try this one)
  • Traders should try and stay away from markets when volatility or uncertainty is high.

It is important to understand the best times for trading stocks in order to maximize profits.

Overall, your trading plan will tell you the best time for you to trade stocks. Over time with practice in a simulated account, you will be aware of the best times for trading.

Your best times will be different than mine; they will vary for all of us and that is okay. We all view the stock market and read charts in our own way.

Best Stocks to Buy Right Now

What are the stocks to invest in right now? Should you buy stocks now?

Well, first of all, I am not an advisor telling you what to invest in. You are responsible for doing your due diligence.

The best stocks to buy are the stocks that you understand the best – YOUR Watchlist!

Typically, that means following 10 stock tickers and learning everything you can about how those stocks move.

Other investing gurus may tell you the best stock to buy is one that has a low price-to-earnings ratio. This is because the company has room for growth, and they are more than likely not overvalued in the market. They look for industries that are experiencing either a slowdown or an increase in competition.

Personally, I like to stick with strong, healthy companies to buy.

Many times the best stocks to buy right now are growth stocks, which have been very successful in 2021. These types of companies grow rapidly and offer significant returns on investment in a short period time frame.

What are the best stocks to buy now or put on a watchlist? These are the most popular stocks investors tend to follow:

  • Apple (Nasdaq: AAPL)
  • Advanced Microdevices (Nasdaq: AMD)
  • Amazon (Nasdaq: AMZN)
  • Meta / Facebook (Nasdaq: FB)
  • Nvidia (Nasdaq: NVDA)
  • Tesla (Nasdaq: TSLA)
  • More Best Stocks to Buy

When you invest in these stocks as an investor, it is important that you look for them during their good moments so that your investments will increase significantly over time and always have risk management strategies in place (BEFORE YOU ENTER THE TRADE).

Can You Afford to Buy Stocks?

There are a lot of factors that go into determining the best time for someone to begin investing or trading stocks.

The most important aspect is whether or not you have enough money at your disposal, which can be determined by your personal financial situation.

Other factors that may play a role in determining the best time to trade are whether or not the person trading has a specific investment objective, and if they have a time-sensitive need.

You need to know your long-term goals for buying stocks.

Are you buying stocks as a long-term investor or if you are buying stocks for income?

Either way, you need a solid idea of how to plan to manage your risk and maximize your profit. That is why investing in stocks is so enticing for so many traders.

Read Now: How Fast Can You Make Money in Stocks?

So, should you buy stocks now?

The current market conditions are a great time to buy or short-sell stocks.

However, there are many trading mistakes when investors place a trade.

Whether we are experiencing a bull run or heading into a bear market, there is always money to be made in the stock market. You should not question yourself is it time to buy stocks.

Regardless, you must invest the money in a solid investing education. That is non-negotiable.

If you want to go out and start buying stocks without investing knowledge, that is fine. Just do not complain if you lose more money than the only investing course I recommend. Check out my Trade and Travel review.

You must do your own due diligence when investing in stocks and finding a good time to buy stocks.

This is your investing journey!

Your journey will be different than my investing journey. That is okay because we each will find our niche and how we like to trade stocks.

Back to the original question, is now a good time to buy stocks?

Overall, you must look for the best companies to invest in. That will make you successful at investing.

Know someone else that needs this, too? Then, please share!!

Did the post resonate with you?

More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!

Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.

Source: moneybliss.org

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Feelings of Financial Insecurity in America Soar to Record High, Even as Consumer Anxiety About the Economy and Recession Recede Northwestern Mutual’s 2024 Planning & Progress Study finds just over half of U.S. adults expect recession this year, a significant drop from two-thirds who said the same in 2023 One-third (33%) of Americans say they … [Read more…]

Apache is functioning normally

Millions of employees work from home at least part time. They’ve carved out dedicated office space and plopped laptops on kitchen counters and in closets. They almost never can declare the home office tax deduction.

Millions of self-employed people have also created workspaces at home. If they use that part of their home exclusively and regularly for conducting business, and the home is the principal place of business, they may be able to deduct office-related business expenses.

Why the difference? The Tax Cuts and Jobs Act nearly doubled the standard deduction and eliminated many itemized deductions, including unreimbursed employee expenses, from 2018 to 2025.

Read on to learn whether or not you may qualify for the home office tax deduction.

What Is a Home Office Tax Deduction?

The home office tax deduction is available to self-employed people — independent contractors, sole proprietors, members of a business partnership, freelancers, and gig workers who require an office — who use part of their home, owned or rented, as a place of work regularly and exclusively.

“Home” can be a house, condo, apartment, mobile home, boat, or similar property, and includes structures on the property like an unattached garage, studio, barn, or greenhouse.

Eligible taxpayers can take a simplified deduction of up to $1,500 or go the detailed route and deduct office furniture, homeowners or renters insurance, internet, utilities needed for the business, repairs, and maintenance that affect the office, home depreciation, rent, mortgage interest, and many other things from taxable income.

After all, reducing taxable income is particularly important for the highly taxed self-employed (viewed by the IRS as both employee and employer.)

An employee who also has a side gig — like driving for Uber or dog walking — can deduct certain expenses from their self-employment income if they run the business out of their home.
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Am I Eligible for a Home Office Deduction?

People who receive a W-2 form from their employer almost never qualify.

In general, a self-employed person who receives one or more IRS 1099-NEC tax forms may take the home office tax deduction.

Both of these must apply:

•   You use the business part of your home exclusively and regularly for business purposes.

•   The business part of your home is your main place of business; the place where you deal with patients or customers in the normal course of your business; or a structure not attached to the home that you use in connection with your business.

Regular and Exclusive Use

You must use a portion of the home for business needs on a regular basis. The real trick is to meet the IRS standard for the exclusive use of a home office. An at-home worker may spend nine hours a day, five days a week in a home office, yet is not supposed to take the home office deduction if the space is shared with a spouse or doubles as a gym or a child’s homework spot.

There are two exceptions to the IRS exclusive-use rules for home businesses.

•   Daycare providers. Individuals offering daycare from home likely qualify for the home office tax deduction. Part of the home is used as a daycare facility for children, people with physical or mental disabilities, or people who are 65 and older. (If you run a daycare, your business-use percentage must be reduced because the space is available for personal use part of the time.)

•   Storage of business products. If a home-based businessperson uses a portion of the home to store inventory or product samples, it’s OK to use that area for personal use as well. The home must be the only fixed location of the business or trade.

Principal Place of Business

Part of your home may qualify as your principal place of business “if you use it for the administrative or management activities of your trade or business and have no other fixed location where you conduct substantial administrative or management activities for that trade or business,” the IRS says.

Can You Qualify for a Home Office Deduction as an Employee?

Employees may only take the deduction if they maintain a home office for the “convenience of their employer,” meaning the home office is a condition of employment, necessary for the employer’s business to function, or needed to allow the employee to perform their duties.

Because your home must be your principal place of business in order to take the home office deduction, most employees who work part-time at home won’t qualify.

Can I Run More Than One Business in the Same Space?

If you have more than one Schedule C business, you can claim the same home office space, but you’ll have to split the expenses between the businesses. You cannot deduct the home office expenses multiple times.

How to Calculate the Home Office Tax Deduction

The deduction is most commonly based on square footage or the percentage of a home used as the home office.

The Simplified Method

If your office is 300 square feet or under, Uncle Sam allows you to deduct $5 per square foot, up to 300 square feet, for a maximum $1,500 tax deduction.

The Real Expense Method

The regular method looks at the percentage of the home used for business purposes. If your home office is 480 square feet and the home has 2,400 square feet, the percentage used for the home office tax deduction is 20%.

You may deduct 20% of indirect business expenses like utilities, cellphone, cable, homeowners or renters insurance, property tax, HOA fees, and cleaning service.

Direct expenses for the home office, such as painting, furniture, office supplies, and repairs, are 100% deductible.
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Things to Look Out for Before Applying for the Home Office Tax Deduction

If you’re an employee with side gigs or just self-employed, it might be a good idea to consult a tax pro when filing.

To avoid raising red flags, you may want to make sure your business expenses are reasonable, accurate, and well-documented. The IRS uses both automated and manual methods of examining self-employed workers’ tax returns. And in 2020, the agency created a Fraud Enforcement Office, part of its Small Business/Self-Employed Division. Among the filers in its sights are self-employed people.

The IRS conducts audits by mail or in-person to review records. The interview may be at an IRS office or at the tax filer’s home.

A final note: Taking all the deductions you’re entitled to and being informed about the different types of taxes is smart.

If you’re self-employed, you generally must pay a Social Security and Medicare tax of 15.3% of net earnings. Wage-earners pay 7.65% of gross income into Social Security and Medicare via payroll-tax withholding, matched by the employer.

So self-employed people often feel the burn at tax time. It’s smart to look for deductions and write off those home business expenses if you’re able to.

To shelter income and invest for retirement, you might want to set up a SEP IRA if you’re a self-employed professional with no employees.

Recommended: First-Time Homebuyers Guide

The Takeaway

If you’re an employee working remotely, the home office tax deduction is not for you, right now, anyway.

If you’re self-employed, the home office deduction could be helpful at tax time. To qualify for the home office deduction, you must use a portion of your house, apartment, or condominium (or any other type of home) for your business on a regular basis, and it generally must be the principal location of your business. This is something to keep in mind if you’re in the market for a new home, since writing off a portion of your home expenses could help offset some of the costs of homeownership.

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FAQ

How much can I get written off for my home office?

Using the simplified method of calculating the home office deduction, you can write off up to $1,500. Using the regular method, you’ll need to determine the percentage of your home being used for business purposes. You may then be able to deduct that percentage of certain indirect expenses (like utilities, cellphone, cable, homeowners or renters insurance, property tax, HOA fees, and cleaning services). Direct expenses for the home office, such as painting, furniture, office supplies, and repairs, are generally 100% deductible.

Can I make a claim for a home office tax deduction without receipts?

The simplified method does not require detailed records of expenses. If using the regular method, you should be prepared to defend your deduction in the event of an IRS audit.

The IRS says the law requires you to keep all records you used to prepare your tax return for at least three years from the date the return was filed.

What qualifies as a home office deduction?

Things like insurance, utilities, repairs, maintenance, equipment, and rent may qualify as tax deductions.

Photo credit: iStock/Marija Zlatkovic

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These chic home decor pieces look so expensive but are so affordable

Looking to give your home a bit of a facelift? As much as we love trendy décor pieces, we don’t love the hefty price tags that tend to come with them. So we were thrilled to find that Walmart has a ton of great deals on chic home décor pieces so you can live in the trendy space of your dreams — no matter your budget.

From throw pillows to area rugs, mirrors and more, check out the list below of our favorite pieces from Walmart, and grab your favorites in time to give your home a refresh for spring.

Shop this article: Phantoscope Pom Pom Velvet Series Decorative Throw Pillow, Better Homes & Gardens Indoor Carved Mid-Tone Brown Wood Decorative Dough Bowl and KUETH 5’x7′ Area Rugs for Living Room

Refresh your home for spring with these trendy-yet-affordable home decor pieces from Walmart

Phantoscope Pom Pom Velvet Series Decorative Throw Pillow

Velvet furniture is super trendy right now — but if you can’t invest in a whole furniture piece, a throw pillow is the perfect way to get some of this luxurious fabric into your space. These cute two-packs come in nearly a dozen colors.

Better Homes & Gardens Indoor Carved Mid-Tone Brown Wood Decorative Dough Bowl

Store fruit, mail, your keys or anything else that needs a stylish home in this decorative carved wood bowl.

KUETH 5’x7′ Area Rugs for Living Room

These area rugs are low maintenance thanks to their low pile — and the fact that they’re machine-washable. Choose from eight available patterns to match your home’s aesthetic.

Neutype 32″x22″ Aluminum Alloy Wall Mount Rounded Corner Rectangular Mirror

This mirror will add light and subtle gold accents to any room — plus, its curved frame design is soft yet striking for an accent piece that’s sure to impress.

Crystal Art Gallery Round Woven Paper Rope Multicolor Wall Art Set of 3

Each of these three woven paper rope décor pieces is 12 inches wide. Arrange them on the same wall or hang them separately.

DR.Planzen 4 ft Artificial Olive Plants with Realistic Leaves and Natural Trunk

This 4-foot artificial olive tree has silk leaves for a realistic look. It comes in a black pot that you can place in another, more decorative container.

Mainstays Ombre Velvet Plush 50 X 60 Throw

Cozy up in this plush velvet throw blanket, woven in an ombre pattern that adds a subtle pop of color to any space.

Yanwe1 Ceramic Vases, Set of 2 

These vases are a fun way to add modern, abstract art to a bookshelf or table top. This set of two gives you two sizes to arrange.

Thyme & Table Stoneware Serve Bowl

This dotted stoneware serving bowl has a gold rim that gives it an elevated look, along with a wide design perfect for serving salads, pasta and many other dishes.

Better Homes & Gardens Gold Modern Geometric 5″ x 6″ Tabletop Sculpture

Need a gold accent for your coffee table or entryway console? This geometric tabletop sculpture lends just a touch of visual interest to any space.

Better Homes & Gardens Large Natural Poly Rattan Open-Weave Round Basket

This large, open-weave basket is the perfect place to store throw pillows, extra blankets, magazines or anything else that needs to be organized, but not necessarily hidden away.

Prices listed reflect time and date of publication and are subject to change.

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Source: ketk.com