Home Office Tax Deductions

If you work from home, you may be eligible to receive a home office tax deduction. In this article you will find a clear explanation of what qualifies as a home office tax deduction, who is eligible to receive a home office tax deduction, and how you can deduct home office expenses.

Before we go any further, let’s look at what requirements are necessary to be able to claim a home office. The act of speaking to clients from your home is not enough to be able to claim you have a home office. According to the IRS website (www.irs.gov), in order to be eligible to receive a home office tax deduction, there are two key requirements that must be met. The following requirements are listed word-for-word from the site. They are:

1. Regular and Exclusive Use – You must regularly use part of your home exclusively for conducting business. For example, if you use an extra bedroom to run your online business, you can take a home office deduction for the extra bedroom.

2. Principal Place of Your Business. You must show that you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction. For example, if you have in-person meetings with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business. You can deduct expenses for a separate free-standing structure, such as a studio, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or the only place where you meet patients, clients, or customers.

If you have determined that you do, in fact, have a legitimate home office and would like to know what expenses qualify for a home office tax deduction, the information listed below is very important.

In general, there are two types of expenses related to business. They are direct expenses and indirect expenses.

Direct Expense – A direct expense is one that is directly related to the business. An example of a direct expensive would be paint, carpet, windows, etc. that is applied directly and solely to the home office area.

Indirect Expense – An indirect expense is a more common type of home office expense. These expenses are incurred for running your home business. An example of an indirect expense would be rent payments, electric bills, telephone bills, insurance payments, etc. NOTE – The full amount of these bills cannot be deducted. This home office tax deduction will be based on the percentage of the space your home office fills in comparison to the rest of your home.

As is the case with any tax deduction, it is imperative that you keep all receipts, copies of bills, check stubs, and maintain a strict log of business traveling, business dining, business gas expenses, business office expenses, and so on. Come tax time, it is likely that you will be able to deduct a portion of all of these expenses. NOTE: Health insurance premiums are a self employed tax deduction, so if you are self employed be sure to claim the high cost of your insurance on your tax bill.

Fore more online information about how to deduct home office expenses, and to learn more about home office tax deductions, visit the IRS website.

Please noteThis author is not a licensed tax attorney or tax preparer. The purpose of this article is to provide information and advice and should not be the sole source of information for home office tax deductions. Speak with a qualified expert before filing your taxes.


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