If you are running a new home-based business, or have begun telecommuting for an established company, then you can consider claiming home office tax deductions on your next tax return. There are many benefits to be enjoyed by those who can qualify for these tax deductions. But you should first make sure to determine if home based tax deductions appropriate for your situation
What do you stand to gain?
If you meet the requirements for a home office deduction as defined by the IRS, then you may be able to deduct a percentage of the following:
- The real estate property taxes on your home
- Interest on your mortgage
- Depreciation on your home (if you own)
- Your rent payments if you are not a home owner
- Painting, and repairs
- Insurance for homeowners or renters
If your home office qualifies as your principal place of business, then you can also deduct business related commuting expenses, such as traveling to and from clients or vendors.
All of your home office deductions are calculated using the IRS Form 8829. Terms and conditions may vary, so make sure to do your research. The IRS has several publications on issues involving home office deductions. Alternatively, you could ask a tax consultant.
Some considerations before making your claim...
There are a few things you should keep in mind, however, when claiming any home office deductions:
- Make sure that you are familiar with and meet the specific requirements needed to claim deductions.
- Some people believe that by claiming home office deductions you will increase your chances of receiving an audit. Whether or not this is true, it is in your best interest to keep good records including photos of your work area, as well as any documentation, such as a bill for a separate phone-line, that can prove the existence and usage of your home office.
- Some of the deductions have limitations. If, for example, your gross business income is less than your total business expenses, you cannot claim a home office deduction. Again, you should make sure that you are clear with what you can claim.
In short, while the home office deduction offers many benefits to those who work from home, it does require that you be well informed and that your operations are well documented.