In the last 10 years, the use of home offices has exploded. From telecommuting to running a home business, millions of people are making use of a home office. The good news is that you can actually take tax deductions for the use of a home office. It used to be that the IRS would red flag people for taking these deductions, sometimes resulting in the increased chance of an audit, but with so many people working from home now, thanks to technology, just taking these deductions will no longer mark you out. But you still need to be careful, since the IRS wants to make sure that your home office is being used for business purposes.
Qualifying for home office deductions
In order to qualify for home office deductions, you have to use the space in your home, or the deducted supplies and items, for regular and exclusive business purposes. There are some exceptions for storing inventory that you sell, or running an in-home daycare, but, for the most part, you have to use the area you are deducting, and the items you are deducting, for business purposes only.
Another thing to keep in mind is the fact that if you telecommute, working for someone else, you cannot take deductions for items or space that you are being reimbursed for. If your employer is covering some of the costs related to the home office, you cannot deduct those costs on your taxes.
Possible home office tax deductions
Here are some of the items that you might be eligible to deduct on your taxes:
- Percentage of your mortgage interest (don’t double deduct this, though, on Schedule A if you itemize).
- Percentage of your home property taxes.
- Percentage of your rental payments if you don’t own.
- Percentage of utilities you pay.
- Percentage of Internet costs, based on how much of the usage is for your business.
- Percentage of repairs, maintenance and painting for your home.
- Percentage of renter’s or homeowner’s insurance.
- Costs related to a dedicated business phone line in your home office.
- Buying a computer.
- Depreciation on home office equipment.
- Office supplies (such as pens, paperclips, furniture, etc., as long as they are used only for your home business).
- Mileage traveled on behalf of the business or work (as long as it isn’t reimbursed).
- Some qualifying travel and meal expenses.
- Cost of subscription to trade publications that enhance your ability to perform your work, or run your business.
- Cost of cell phone use for work, as long as your employer doesn’t reimburse you.
- Some job training to help you remain competitive and of use to your employer (as long as it isn’t paid for by the employer).
As you can see, there are a number of possibilities for tax deductions when you have a home office. You should double check to ensure that you are taking your deductions properly, and a tax professional using corporate tax software can help with this if you are unsure. Remember that online tax software, and even tax professionals, can make mistakes, so double check. If you have a question, don’t hesitate to ask a professional, or even contact the IRS, whose customer service department can give you straight from the source.