Your home. Your office. Are they one and the same? If so, you may be able to take a home-office deduction that can save income and self-employment taxes.
The deduction gives you the opportunity to claim expenses related to the business use of your home, such as utilities, repairs, and insurance. Meet the requirements, and you’re eligible whether you rent or own your home.
Taxpayers who qualify may use a simplified deduction calculated at $5 a square foot for up to 300 square feet of an area in a home that is used regularly and exclusively for business. The deduction is capped at $1,500 a year.
Here are two questions that can help you decide if you qualify for a home-office deduction.
Do you pass the regular and exclusive business use test? The rules say you have to use your home office on a continuing basis, and that it has to be dedicated to your business.
While you’re not required to have a separate room, personal or family use of your work area means no deduction.
What business activities do you conduct in your office? Meeting customers or clients in your home office qualifies as business use.
Taking care of management and administrative tasks such as writing reports and billing clients also qualifies, as long as you don’t have another office that you use primarily for the same activities.
If your office is separate from your home and you meet the regular and exclusive business use test, you can deduct related business expenses – even if you don’t meet clients or perform management activities there.
Special rules apply to work-at-home employees and daycare facilities. In addition, exceptions apply when you use your home for storing inventory or product samples. Please call us if you would like more information.
Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and Twitter.