Home Office Tax Deduction Guide

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Do you operate a home-based business? Do you often meet clients at your home for business purposes or simply telecommute with an office related exclusively to your job(s)? There are many work-from-home scenarios and here’s where you can find out if you qualify for a tax deduction and how to go about claiming it.

Here are some tips for writing off your home offices on your taxes.

These days many Americans are doing the 9 to 5 and then doing a little (or a lot) extra on the side to make ends meet or work towards the freedom of becoming an entrepreneur.

Either way, don’t forget to claim your business use of your home as a deduction.

Here’s how.

If you regularly meet clients at your home or simply have a home office, you may deduct a percentage of improvements made on your home based on the same percentage of space that your home office occupies.

Here is some basic information regarding figuring and claiming the deduction for business use of the home as quoted from the source.

” To qualify to deduct expenses related to the business use of part of your home you must meet specific requirements.

Even then the deduction may be limited.

To qualify to claim expenses for the business use of your home you must meet the following test.

First, your use of the business part of your home must be exclusive, regular, and for your business.

The business part of your home must be one of the following: your principle place of business, or a place where you meet with patients, clients, or customers in the normal course of your business, or a separate structure not attached to your home you use in connection with your business. “

How Do I Figure The Deduction Percentage?

” Most home businesses are run from a part of the home rather than the whole structure.

Most expenses related to the business use of your home are limited to the percentage of your home used for business or business percentage.

To find the business percentage compare the size of the part of your home that you use for the business to your whole house.

You can use any reasonable method to determine the business percentage.

These are the two commonly used methods for figuring the percentage.

First, the area method, and second the number of rooms method.

For the area method divide the area used for business by the total area of your home.

Say your office is 240 square feet.

Your home is 1200 square feet.

Your office is 20%, 240 divided by 1200 of the total area of your home.

Your business percentage is 20%.

Ok, let’s look at the other method for determining business percentage of the home.

For the number of rooms method divide the number of rooms used for business by the total number of rooms in your home.

You can use this method if the rooms in your home are all about the same size.

Let’s try out this method.

Here’s the scenario.

Peggy has an art studio in her home.

She is allowed to take a deduction for the business use of her home.

The rooms in her house are all about the same size.

There are ten rooms and she uses one for a studio.

Peggy’s business use percentage is 10%. “

Here are some examples of different scenarios to test if you qualify for the deduction.

Scroll down about half way through the page on this small business tax workshop link from the I.R.S.

Here is Form 8829 that you can print out. It is the form that you fill out for expenses for business use of your home

Here are the instructions to fill out form 8829. This link will answer the question, “Who Can Deduct Expenses for Business Use of a Home?” and many other questions regarding this topic.

Here is the link to Publication 587 regarding Expenses for Business Use of Your Home.

Here is the best page to find out all you need to know about small business and taxes.