Many people are fortunate enough to have a short commute – to the office in their home. If you’re one of those lucky people who only have to go downstairs, upstairs or to another room to get to work, you may be able to deduct your work space as a home office. Here are the criteria.
According to the IRS, there are two basic requirements for your home to qualify as a deduction: regular and exclusive use and principal place of your business.
“Regular and exclusive” means the room or space you use for business must be used only for business. For example, if you use your basement as your office, you might be able to deduct the basement.
“Principal place of your business” means you must be able to show that most work is done in your home office. “Most work” can mean you meet clients in your home office, conduct transactions with customers in your home office or utilize the space for administrative activities. The specifications do not mean you must only use this space to conduct business – you may do it offsite, too, but the primary business must take place in the home.
The IRS says, “Generally, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.” Once you have determined the percent of your home you are using for business, you apply that percentage to the expenses for running your home; i.e. utilities, repairs, cleaning, home owner’s association fees, etc. The percentage applicable to your home office is also a deduction.
Another major benefit of having a home office is, if you visit your office first, then the mileage for your trips to clients and customers will be deductible.
Employees who work from home may also qualify for a deduction. If you are an employee, the IRS says to consider the basic requirements (see above) and meet the following requirements as well:
- Your business use must be for the convenience of your employer, and
- You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer.
A full explanation of tax deductions for your home office can be found in Publication 587, Business Use of Your Home. For additional help, contact Myerson & Myerson, CPA’s at 703-753-1040 or firstname.lastname@example.org.
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Katherine Gotthardt, CEO of All Things Writing, LLC, blogs for Myerson & Myerson, CPA’s. For information on blogging and other writing services, email email@example.com.