It's Tax Time! Do You Work At Home On The Computer? Use Your Home Office As a Deduction.
This coming tax season you may be able to deduct more than you thought. If you operate a home-based business, especially if you work at home on the computer then you can use your home office as a deduction. This applies whether you own or rent and the deduction extends to utilities, insurance, and repairs to name a few. There are of course some general requirements as to whether or not your home-based business qualifies as a deduction that the IRS has imposed.
First of all whatever area you designate as your home office must be exclusively and regularly used as an office. You can't put your desk and your computer in your bedroom and write a few emails and call that a home office. It has to be a functioning area set aside for your business where you work at home on the computer every work day. Secondly, the place that you designate for your home office must be where you principally do business in order for it to qualify as a deduction. In other words all of your administrative activities must be done in your home office and can only be done at that location.
When you are preparing to utilize your home office as a deduction you can only deduct a percentage of the rent, utilities, taxes, and others based on the percentage of your house that you use for your office. So, if you know the square footage of your house then measure the square footage of the room that acts as your office, calculate the percentage of that room compared to the whole house and use that percentage to calculate the deduction. For example, if your office is 25% of your house than deduct 25% of your rent and 25% of your phone bill.
Of course you will want to remember to save all of your receipts for purchases like office furniture and computer components. A filing cabinet is a great way to keep all of your records in an organized manner. You'll want to save your utility bills also in order to calculate how much was used towards your home-based business. Remember when you work at home on the computer, using computers as a deduction you will deduct a percentage per year since they depreciate throughout the years. A good accountant can help you with all of these intricate details.
In order for your home-based business to be successful you must make sure you have certain key elements in place before you begin and organization is definitely one of those key elements. No one wants to be in the position of sorting through a pile of papers in a box come tax time. Take the time now to set yourself up properly and set yourself up for success!
