Working from home is a dream come true, so is business ownership. Owning a business entitles you to many deductions. Some people hold the mistaken belief that if you work from home, you are limited on the deductions you can take. The fact is, you can take many of the same deductions as you would if you operated a business from an office or an independent jobsite. Understanding what those deductions are will help you make sure to take every one to its fullest advantage.
Qualifying for Home Office Expenses
According to the IRS, you qualify for deducting home office expenses if part of your home is used for business on a regular basis. Whether it is an entire room or a corner of your kitchen, if that is your designated work area on any given day then it qualifies as an office for your business and you qualify for deductions associated with it. You will need to determine the square footage of the area as well as the cost of any equipment and supplies that you purchase.
The direct expenses associated with your business would include any repairs or construction that were performed to make the area suitable to be a home office. This would also include any equipment and supplies that you purchase throughout the year during the day-to-day operations of the business. Direct expenses involve any money that is spent to further the promotion of your business within your home.
An indirect expense is any money that is spent to manage your home. This means your utilities, any insurance policies you may have, your mortgage, and internet usage. If you have an alarm system, that will be included as well. In order to figure out the cost of any indirect expenses, you will need to determine what percentage of your home’s area is taken up by your business and calculate the cost accordingly.
The structure of your business will also be used to help determine how many work from home tax deductions you can take for your home office. Sole proprietorships and partnerships allow you certain advantages when you are determining the deductions for your home-based business. You will need to talk to a tax professional to understand all of the different rules and regulations that pertain to how deductions are calculated based on your business structure.
Figuring Your Deductions
There are a few different ways to figure out your deductions. When you do your taxes on your own, there are a few you may miss. Talking to a tax professional who deals with businesses and home-based offices will help you take advantage of every possible deduction. Owning a business and being able to work from home is a goal that many of us have. It can be costly if you don’t know how to maximize your deductions and make sure you take advantage of each one. The ultimate goal is to work from home and make sure you get to keep every dime you work for. Talk to a tax professional today so you know what work from home tax deductions are allowed and what ones aren’t.