Home office Worksheet<\/a><\/p>\n <\/p>\n
Taxpayers tend to shy away from taking the home office deduction, assuming that they will be targeted for increased scrutiny from the IRS. That is certainly possible, especially if your deductions are unusually large \u2013 but if you truly were entitled to the deduction, why wouldn\u2019t you take it?<\/p>\n
Assuming you reviewed IRS Publication 587, \u201cBusiness Use of Your Home,\u201d and determined that you qualify, what are the home office expenses you can write off? They are covered in IRS Form 8829, \u201cExpenses for Business Use of Your Home\u201d and the corresponding instructions. You will need to file Form 8829 with your taxes to claim your deduction.<\/p>\n
Expenses can be divided into two categories: direct and indirect expenses. Direct expenses apply only to the area designated as your home office, used exclusively and regularly for business purposes. Painting, wall repairs, or other maintenance applying only to that area will be fully deductible expenses.<\/p>\n
Indirect expenses involve the maintenance of your entire home, such as your utility bill. These expenses are deductible to the percentage of your home that is used for business (if your home office is 10% of the square footage of your home, you can deduct 10% of all indirect expenses). The majority of deductible indirect expenses are listed below. See Publication 587 and Form 8829 for other possibilities.<\/p>\n
Mortgage Interest \u2013 IRS Publication 936, \u201cHome Mortgage Interest Deduction,\u201d provides details on calculating this deduction. Note that the deduction is limited to interest on mortgage debts below $1 million or home equity debts below $100,000<\/p>\n
*Qualified Mortgage Insurance Premiums \u2013 Also discussed in Publication 936, this deduction may be limited or eliminated entirely if your adjusted gross income (AGI) is greater than $100,000 ($50,000 if married filing separately).<\/p>\n
*Real Estate Taxes \u2013 Details on deducting real estate taxes may be found in IRS Publication 530, \u201cTax Information for Homeowners.\u201d<\/p>\n
*Casualty Losses \u2013 Casualty losses from fire and similar losses are deducted as either direct or indirect expenses, based on the type of loss.<\/p>\n
Note: The four expenses listed above are deductible whether or not your home is used for business. If you itemize personal deductions, divide the business-related and personal components between Schedule C (business) and Schedule A (personal) appropriately. Do not double-report any expenses.<\/p>\n
*Utilities and Services \u2013 You may deduct a percentage of household expenses such as electricity, gas, water, trash, and cleaning services. Lawn and outdoor services generally do not qualify.<\/p>\n
*Repairs \u2013 Repairs applying to the entire home, such as repairing a central heating and air conditioning system, are deductible in the proper percentage.<\/p>\n
Be careful that the repair is truly a repair, and not considered a permanent improvement that increases the value (cost basis) of your home. Repairing the roof above your home office is a deductible repair; replacing the entire roof is considered an improvement.<\/p>\n
*Depreciation \u2013 IRS Publication 587 will show you how to calculate the cost basis of your home for depreciation purposes, as well as your actual depreciation and subsequent deduction component.<\/p>\n
*Rent \u2013 If you rent instead of owning your home, rent payments may be deducted using the same square-footage percentage basis.<\/p>\n
*Homeowner\u2019s Insurance \u2013 The amount of premium paid for the tax year can be deducted, also on a percentage basis.<\/p>\n
*Security System \u2013 The operating expenses of a total home security system are deductible on a percentage basis, and the initial cost to purchase and install the system can be incorporated into the depreciation calculation.<\/p>\n
You have the alternate choice of submitting a simplified deduction of a flat $5 per square foot of home office area claimed, up to a 300 square foot ($1,500) limit. Should you choose that path, the only business expenses you can deduct are items unrelated to the use of your home \u2013 for example, office supplies or equipment depreciation. Review your largest home office deductions to get a quick estimate of whether the simplified deduction works best for your situation.<\/p>\n
If you are not comfortable with your home offi ce deductions, seek the advice of a qualified tax professional before filing \u2013 but do not just give up on a deduction that you rightfully deserve based on a perceived increase in audit potential.<\/p>\n","protected":false},"excerpt":{"rendered":"
Click here to download the Home Office Worksheet: Home office Worksheet Taxpayers tend to shy away from taking the […]<\/p>\n","protected":false},"author":1,"featured_media":417,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"yoast_head":"\n
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