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