Home Office Deductions - Tax Deduction Information

When you work from home, you can get benefits from the home office deduction. Some people may think that the home office deduction will significantly increase their chance of being audited by the IRS or it’s very difficult to qualify for the home office deduction guidelines. But as long as you follow the requirements and keep good records of all business-related expenses, you shouldn’t be worried about being audited too much.

Regular and exclusive use
To get the home office deduction, you must regularly use a portion of your home exclusively for your business. The IRS doesn’t specify what “regular use” means, but the guideline is that you must use the space for business on a continuing basis, not occasionally or frequently. You also use that portion of your home “exclusively” for business, which is a more difficult requirement to follow. The space must be used only for business. If you use the space for personal purposes as well as business purposes, you won’t be qualified for the home office deductions.

Here are some practical ways to qualify these requirements:

  • Use furniture such as a room divider if you want to deduct a portion of a room for business.
  • Get a separate phone line for the business and keep it in your home office.
  • Have regular meetings with your clients at your home office and keep logs of the meetings.
  • Use your home office address for your business mailing.

Administrative and management work
When your work is mainly performed outside of the home office, i.e. you’re a contractor or gardener, you can still deduct home office as long as you meet these requirements:

  • You use the home office for administrative and management activities.
  • There is no other fixed location to do such activities.

Amount of the home office deduction
The amount of the deduction should be accurately calculated from the portion of the home office to the whole residence. If your home is 1000 square feet, and your home office is 200 square feet, the portion of your home office is 20% of your entire place, and you can deduct 20% of the money that you spend to maintain your residence.

Main expenses that you can deduct are rent if you rent, or mortgage interest, property taxes and any association fees if you own. You can also claim deductions for utilities, home-owner’s or renter’s insurance, general maintenance or repair fees that affect your home office, etc.

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