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Work-at-Home.org
Source: IRS.gov article 163079,00
Do you know that if you work at home or have your own home business, that the business-related portion of such expenses such as security, electricity, house maintenance, property taxes, mortgage interest, cleaning services, trash removal and much more may be deductible?
These deductions may add up to hundreds or thousands of dollars in your pocket.
Generally, the amount of the deduction depends on the percentage of the home that is used for business. The deduction will be limited if gross income from the business is less than the total business expenses.
Here’s how to calculate how much is deductible:
A taxpayer can use any reasonable method to compute business percentage, but the most common methods are to:
• Divide the area of the home used for business by the total area of the home, or
• Divide the number of rooms used for business by the total number of rooms in the home if all rooms in the home are about the same size.
Taxpayers may not deduct expenses for any portion of the year during which there was no business use of the home. If the gross income from business use of the home is less than the total business expenses, the deduction for certain expenses is limited. Publication 587 includes examples, worksheets and additional information on computing the allowable deduction.
Personal Expenses Are Not Business Expenses
It is important for taxpayers to realize that business expenses may be deducted only if they are ordinary and necessary for the particular type of business. Personal, family and living expenses are not deductible under any circumstances. A common error is to deduct expenses for a portion of the home that is not used regularly and exclusively for business.
Example: The basic local telephone service charge, including taxes, for the first telephone line into a home is a nondeductible personal expense. However, charges for business long-distance phone calls on that line, as well as the cost of a second line into a home used exclusively for business, are deductible business expenses.
The IRS encourages taxpayers to familiarize themselves with the requirements before taking a home office deduction and to keep complete and accurate records to substantiate deductions. According to IRS research, understated business income, including underreported receipts and overstated expenses, is an area where compliance is a concern. In addition to increasing outreach and education in these areas, the IRS will also be focusing enforcement efforts, including examinations, on these issues.
More info at irs.gov.
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