Guideline for Home Office Deductions

The ever-changing landscape of the American job market is such that many people in the workforce have now begun working, partially and full-time, from their / homes. Just like brick-and-mortar shops, home-based businesses also are allowed certain deductions come tax time. Whether you have a room dedicated solely to your business or simply use a desk in a corner of the kitchen to get your work done, work 40 hours a week or are a weekend warrior, as long as you operate a legitimate business, you may be eligible for deductions on your income taxes. The following is a guideline for home office deductions:

What Qualifies as a Home Office?
A home office must be a specific area in your / home that is dedicated solely for business. If you communicate with clients, conduct your everyday business affairs or even store product, it may qualify as a home office. Also, if your employer requires you to do work from home, your home office may also qualify. However, just because you feel overwhelmed at work and bring it home to try to "catch up" doesn't mean you have a "home office". Always check with your tax adviser first to verify that what you have can legitimately claimed as a home office.

Home Office Size as Percentage of Home Used
To determine what amount of your / home expenses can be deducted for your home office when using an area inside of your home, you must first determine the size of your home office in relation to the total square footage of your house. That means measuring the area of the room or dedicated work space and dividing it the total square footage of your home. For example, if you live in a 2,000 square foot home and the room you use as dedicated office space is 150 square feet in size, the percentage of your / used solely for office space is 7.5%. If you are unsure of your home's total square footage, consult your original home loan documents or property tax information. If you've converted your garage into an office, this home percentage rule doesn't apply. Again, speak with your tax adviser to find out how to determine home office deductions for a separate structure.

What Home Expenses are Deductible?
After you've determined what percentage of your / home is used for actual business, you can calculate your deductions for typical homeowner expenses, such as mortgage, electricity, gas, internet (if applicable), phone, real estate taxes, homeowners insurance and home repairs. Renters can also follow the same guidelines. However, most states require that you have authorization from your landlord to use the property for business purposes before you can claim any home office deductions.

This information is only meant as a guideline for home office deductions. Since I am not a tax consultant, adviser or CPA, please be sure to talk to your tax professional before filing your taxes to get the most accurate and current information available. Working from home has become a way of life for many / homeowners. Why not take advantage of any tax benefits you may receive from it? Remember, the deadline to file your taxes this year is Tuesday, April 15, 2012.

Originally posted on my Northern Virginia Homes real estate blog here: http://northernvirginiahomes.net/2012/03/29/guideline-for-home-office-deductions/.