Most of the time, self-employed individuals work out of their home. Here is a primer on home office tax expenses that you can claim on your taxes if this is the case with you.
Home Office Tax Expenses
A country that is built on small businesses is America. The guts of our economy are the little guys pursuing the American Dream from the extra bedroom even though the big companies are the darlings of the media. Fortunately, the tax code contains deductions tailored to help cut your tax bill.
Keeping a receipt for each and every amount you are claiming is very important when you are claiming home office tax expenses. Receipts are your ammo when you are dealing with the IRS. You should keep them at all costs.
When maintaining a home office, taxpayers often wonder how they differentiate a business expense from a simply home expense. The key is the square footage. Simply dividing the square footage of your office by the total square footage of the home. This number is typically represented by a percentage such as 20 percent. Put another way, the home office represents 20 percent of the square footage of the house. You can multiply the above answer, once you are able to solve it, by the total yearly amounts paid for rent or mortgage interest, insurance, maintenance, utilities, taxes, depreciation of the home and repairs. You can actually deduct each of these home office tax expenses figures.
Another thing you can do in addition to the above is deduct expenses completely related to the business. One example is the purchase of a desk for the office which is entirely attributable to the office and can be deducted in full.
Here are Some Words of Caution
When it comes to home office tax expenses, there are some limitation. If you happen to be reimbursed by an employer for various home office expenses, then you cannot also claim those expenses as a tax deduction. Sorry, no double dipping.
There has been an urban myth that the Internal Revenue Service keeps a close eye on home-based businesses for some time. It is not clearly the case today even though this may have been true ten years ago. The IRS has actually come out and issued clear statements to the contrary to this end. You should not fail to claim home office tax expenses because of fear of an audit. This fear is simply not a rational one.
When you are running a small business, this can be both stressful and incredibly gratifying. Making sure that you claim home office tax expenses to help your cash flow is very important.
Home Office Tax Expenses
A country that is built on small businesses is America. The guts of our economy are the little guys pursuing the American Dream from the extra bedroom even though the big companies are the darlings of the media. Fortunately, the tax code contains deductions tailored to help cut your tax bill.
Keeping a receipt for each and every amount you are claiming is very important when you are claiming home office tax expenses. Receipts are your ammo when you are dealing with the IRS. You should keep them at all costs.
When maintaining a home office, taxpayers often wonder how they differentiate a business expense from a simply home expense. The key is the square footage. Simply dividing the square footage of your office by the total square footage of the home. This number is typically represented by a percentage such as 20 percent. Put another way, the home office represents 20 percent of the square footage of the house. You can multiply the above answer, once you are able to solve it, by the total yearly amounts paid for rent or mortgage interest, insurance, maintenance, utilities, taxes, depreciation of the home and repairs. You can actually deduct each of these home office tax expenses figures.
Another thing you can do in addition to the above is deduct expenses completely related to the business. One example is the purchase of a desk for the office which is entirely attributable to the office and can be deducted in full.
Here are Some Words of Caution
When it comes to home office tax expenses, there are some limitation. If you happen to be reimbursed by an employer for various home office expenses, then you cannot also claim those expenses as a tax deduction. Sorry, no double dipping.
There has been an urban myth that the Internal Revenue Service keeps a close eye on home-based businesses for some time. It is not clearly the case today even though this may have been true ten years ago. The IRS has actually come out and issued clear statements to the contrary to this end. You should not fail to claim home office tax expenses because of fear of an audit. This fear is simply not a rational one.
When you are running a small business, this can be both stressful and incredibly gratifying. Making sure that you claim home office tax expenses to help your cash flow is very important.
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