For many taxpayers who work from home, figuring out their tax returns can seem like a nightmare. The policies concerning home office deductions are often hazy and hard to decipher.
In fact, the Internal Revenue Service does not even publish any kind of clear rules on this topic. Instead, they leave it up to such self-employed workers or small-business owners – and his or her tax preparer – to make the case as to whether something is a legitimate home office expenditure, and therefore worthy of deduction.
What Space Qualifies for Home Office Deduction?
For something to be considered worthy of deduction, a home office space has to be used regularly and exclusively for business purposes. It is possible to simply relegate one corner of a room to business, but it must be used exclusively for that reason. Regardless of size, the home office may not be used for anything except business..
The amount of deduction granted is based on the proportion of total space in the home that the office occupies. For example, if an office occupies 25 percent of the home, then the business owner could deduct that portion of a number of indirect costs – such as utilities or real estate taxes – as business expenses. In the instance that the taxpayer is a renter, a percentage of the rent payment could also be deducted.
If the home office qualifies for deduction, direct costs may also be deducted. These would include costs related specifically to the space, including repairs or decoration (furniture, wallpaper, and other such expenses).
Can You Deduct the Contents of Your Office?
When it comes to the details of determining what in the office may be deductible, it is often advisable to seek help from a tax professional. While the home office itself may be deductible, not everything inside necessarily is, and it can be tricky to discern which is which.
In order to deduct an expense it must fit very specific criteria. Firstly, the expense in question must be necessary in order to bring the business owner or self-employed taxpayer more profit. Secondly, the expense must be something that would be found in other, ordinary, businesses of the same kind.
The requirements tend to be especially specific for offices that only occupy part of a room in the home. In such cases, take care to only declare those items that are used exclusively for business use.
Be careful of being too liberal with business deductions. While some self-employed workers are more aggressive than others, it is prudent to air on the side of conservancy. If you are too liberal, and try to deduct items such as televisions or plants that are not absolutely necessary for maintaining a home office, it is possible that you may end up inviting an audit from the IRS.
In fact, the Internal Revenue Service does not even publish any kind of clear rules on this topic. Instead, they leave it up to such self-employed workers or small-business owners – and his or her tax preparer – to make the case as to whether something is a legitimate home office expenditure, and therefore worthy of deduction.
What Space Qualifies for Home Office Deduction?
For something to be considered worthy of deduction, a home office space has to be used regularly and exclusively for business purposes. It is possible to simply relegate one corner of a room to business, but it must be used exclusively for that reason. Regardless of size, the home office may not be used for anything except business..
The amount of deduction granted is based on the proportion of total space in the home that the office occupies. For example, if an office occupies 25 percent of the home, then the business owner could deduct that portion of a number of indirect costs – such as utilities or real estate taxes – as business expenses. In the instance that the taxpayer is a renter, a percentage of the rent payment could also be deducted.
If the home office qualifies for deduction, direct costs may also be deducted. These would include costs related specifically to the space, including repairs or decoration (furniture, wallpaper, and other such expenses).
Can You Deduct the Contents of Your Office?
When it comes to the details of determining what in the office may be deductible, it is often advisable to seek help from a tax professional. While the home office itself may be deductible, not everything inside necessarily is, and it can be tricky to discern which is which.
In order to deduct an expense it must fit very specific criteria. Firstly, the expense in question must be necessary in order to bring the business owner or self-employed taxpayer more profit. Secondly, the expense must be something that would be found in other, ordinary, businesses of the same kind.
The requirements tend to be especially specific for offices that only occupy part of a room in the home. In such cases, take care to only declare those items that are used exclusively for business use.
Be careful of being too liberal with business deductions. While some self-employed workers are more aggressive than others, it is prudent to air on the side of conservancy. If you are too liberal, and try to deduct items such as televisions or plants that are not absolutely necessary for maintaining a home office, it is possible that you may end up inviting an audit from the IRS.
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