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July 12 2016
Home Office Deduction

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Getting Comfortable With The Home Office Deduction

One of the great things about setting up a home office is that you can make it as comfy as possible.  Assuming you've done that, another good idea is getting comfortable with the home office deduction.

To qualify for the deduction, you generally must maintain a specific area in your home that you use regularly and exclusivelyin connection with your business.  What's more, you must use the area as your principal place of business or, if you also conduct business elsewhere, use the area to regularly conduct business, such as meeting clients and handling management and administrative functions.  If you're an employee, your use of the home office must be for your employer's benefit.

The only option to calculate this tax break used to be the actual expense mehod.  With this method, you deduct a percentage (proportionate to the percentage of square footage used for the home office) of indirect home office expenses, including mortgage interest, property taxes, association fees, insurance premiums, utilities (if you don't have a separate hookup), security system costs and depreciation (generally over a 39-year period).  In addtion, you deduct direct expenses, including business-only phone and fax lines, utilities (if you have a separate hookup), office supplies, painting and repairs, and depreciation on office furniture.

But now there's an easier way to claim the deduction.  Under the simplified method, you mulitply the square footage of your home office (up to a maximum of 300 square feet) by a fixed rate $5 per square foot.  You can claim up to $1500 per year using this method.  Of course, if your deduction will be larger using the actual expense method, that will save you more tax.  

Questions?  Please give us a call.

Last Updated by Admin on 2016-11-16 01:46:04 PM

 

Richard Camp, CPA, PA blogs and all other multimedia content is provided for informational and educational purposes only and should not be construed as financial tax, accounting, legal, consulting or any other type of advice regarding any specific facts and circumstances, nor should they be construed as advertisements for financial services.  Because accounting standards, tax law, and technologies are constantly changing, content in this blog could contain outdated information.

 

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this website (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this website (or in any attachment).

 

Richard Camp, CPA, PA blogs and all other multimedia content is provided for informational and educational purposes only and should not be construed as financial tax, accounting, legal, consulting or any other type of advice regarding any specific facts and circumstances, nor should they be construed as advertisements for financial services.  Because accounting standards, tax law, and technologies are constantly changing, content in this blog could contain outdated information.

 

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this website (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this website (or in any attachment).

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Richard Camp, CPA, PA blogs and all other multimedia content is provided for informational and educational purposes only and should not be construed as financial tax, accounting, legal, consulting or any other type of advice regarding any specific facts and circumstances, nor should they be construed as advertisements for financial services.  Because accounting standards, tax law, and technologies are constantly changing, content in this blog could contain outdated information.

 

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this website (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this website (or in any attachment).