Oct 26 2008
Home Office: Take tax advantage for your home office
Home office tax deductions should not be overlooked at tax time. Sticking to the rules should not be overlooked either. Qualifying your home office for the deduction may feel like walking a tightrope. In reality good records and truthful reporting is all that is needed.
Both home based business owners and employees can qualify:
· As a business owner – the home office is your principle place of business
· As a business owner – the home office is where you meet clients, customers or patients
· As an employee – the home office is used for your employer’s convenience
The home office tax deduction is figured on a percentage basis. The square footage of the home office is figured into the expenses of the home’s operation. Real Estate taxes to home repairs effects the entire square footage of the home but the home office can only benefit from the space it occupies. (Equipment and other supplies purchased specifically for the home office is figured as separate deductions)
For example: the home has 2,000 square feet living space. The home office occupies 200 square feet of that 2,000. If your utilities ran $1,000 per year each square foot would be worth $2.00. The home office would be eligible for a $400 deduction. This number would be adjusted if the business had less gross income than the total allowed deduction.
Tax rules and regulations change so check with your accountant before taking home office deductions. The Internal Revenue Service (IRS) website is the place to look for clarification and further information on home office deductions.
