- Your principal place of business.
- A place to meet or deal with clients, customers or patients in the normal course of business.
These restrictions mean that no personal activities can be conducted from a deductible home office. If you qualify to take write-offs, you can deduct a proportionate share of expenses including mortgage interest, depreciation deductions, utilities, insurance, security systems, and repairs.
The IRS often challenges home office deductions. To protect yourself in case of an IRS audit, keep good records. It also helps to take photos of the room to help prove it was used for business purposes.
Here are a few more tips concerning home offices.
- To figure the percentage of your home used for business, you can use the most advantageous of two methods — square footage or the number of rooms.
- Even if you don’t qualify for the deduction, you might be able to get a write-off for the expenses involved in storing inventory or product samples in a room in your home.
- Home office deductions can’t exceed your income. But if your expenses and deductions are greater, you can carry the loss forward to a future year.
- If a home office is required by an employer, it’s a good idea for the employee to get a written statement from the company explaining the requirement. Another option is to have the requirement included in an employment contract. To be deductible, the home office of an employee must be for the convenience of the employer.
Consult with your tax advisor if you have any questions about home office tax breaks.
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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