Taking A Closer Look At Common Questions Regarding The Home Office Deduction
If you work at home, having a separate section of the house designated for work is not just convenient, it could be beneficial when you have to file your taxes at the end of the year. You can actually claim a home office deduction if you meet specific criteria set forth by the IRS, which could lower your tax bill. Here are a few of the biggest questions self-employed work-at-home individuals have about qualifying for a home office deduction on their taxes.
Can you claim the home office deduction if you simply have a workspace?
The short answer to this is no. The IRS defines a home office as a location that is completely set aside from the rest of the home. For example, if you have a work desk and computer in your livingroom, this room is still used for other purposes, and, therefore, would not qualify for a deduction. However, if you have a small room where you have only your work-related furniture and equipment, you could use this to qualify for the home office deduction.
How is the home office deduction figured?
There are a couple of different ways that you can figure the home office deduction when it comes to business tax preparation. The IRS offers the simplified option, which involves finding the square footage of the office space. You can claim a deduction $5 for every square foot of space that you use in your home exclusively for work purposes. This method is much easier to determine than the older, standard deduction method, which involves finding the percentage of your home that is used for work purposes.
What records should you keep to prove that you have a home office?
If you plan to take the home office deduction on your taxes, it is always a good idea to keep records to prove what you claim when you file. Take a photo of your office space and keep it in your tax records, as this will suffice as proof that you do indeed have a designated workspace in your home if you are ever audited.
Working from home is the perfect way to combine employment and life, but self-employment can bring along with it a hefty tax bill. Be sure you consider the home office deduction before you file, and any other deduction that your business may qualify for as well by talking to your business tax preparation professional.
