The BizFilings blog covering business tips and trends.
'Tis the Season for Home Office Deductions
Published on Nov 3, 2010
Tis the Season for Home Office Deductions! Learn more at 'Time to Start Up,' the small business blog by BizFilings.
The ghoulish costumes and Halloween decorations are by now most likely stashed into a box somewhere. Some of you may even be digging for your Thanksgiving treasures or other holiday trinkets at this very moment.
But don't forget the most wonderful time of the year is really tax season.
OK, I'm exaggerating just a wee bit, but it's not too early to start thinking about your home office deductions.
If even a part of your home is designated for business - say for doing paperwork or even storing records - you may be eligible to claim a tax deduction for some of your expenses.
If this is your inaugural year in business, you may have been exposed to several theories about the home office deduction. From one extreme, you may have heard it's the best thing since sliced bread. And on the other end of the spectrum, you may have heard that claiming home office deductions draws unwanted attention from the IRS - like a "pick me for an audit" sign has just been plopped in your front yard.
The experts at Business Owner's Toolkit cite that, "as a general rule, you should never shy away from taking a deduction you are legally entitled to. The same holds true when it comes to the home office deduction. Nevertheless, we recommend that you keep meticulous records of all your expenses and be prepared to back them up."
When deciding which deductions you are "entitled to," Business Owner's Toolkit does not recommend writing off your pool table or hot tub. The government frowns upon that.
Here are some tips in helping you calculate your deduction amount:
Find out if you qualify. The requirements of the home deduction are rigid. Your home must be used exclusively and regularly for business. Additionally, your home must also be used as your primary place of business OR be used to personally meet with customers or clients in the normal course of your business.
Research. Determining the amount that you can deduct is dependent on many factors. Therefore, it's important to figure out things such as what you spent for each item of the home office deduction. These factors include rent or mortgage interest as well as the size of the designated area that was used for work.
As a bonus, a tax office deduction application tool has also been added recently to the Toolkit site to guide you virtually through the home office deduction process.
Do you have other tips to share with small business owners and home-based business owners who are just starting a business?