Millions of people work out of their homes on daily basis. Running a small home business or telecommuting, working from home is a cost effective plan. Setting up a home office allows for a convenient work area to conduct your business. Even though people utilize home space for work, deducting your home office correctly is a wide spread mistake. Following specific regulations and guidelines, you will be able to deduct correctly to help earn credit to reduce your taxable income.
Two Important Factors in Deducting Home Office Space Use
The only way to maximize on your deductions for your home office is setting up a proper work space. Depending on specific guidelines, you will be able to use the home office space deductions for your own business or working for another employer. Your home office space does not require an entire room to claim deductions. Clearing a section of a room for work is sufficient to claim pertaining deductions.
Two important factors for deducting your home office space correctly must be considered.
- Work Space Only Rule: The home office space must be for work use only. Using the work area for other endeavors will not allow you to claim deductions for work.
- Regular Use: The second condition of deducting your work space area is regular use. Now, regular use does not mean everyday use. Consistent and constant use of the space is the main factor of regular use of your home office.
Home Office Space for Your Business
Along with exclusive work space and regular use, your home office must meet specific standards, including one of the following:
- Principal place for conducting business
- An area to meet with clients and perform administrative work
- Separate structure from your home exclusively for your business.
If you meet one of these three categories, you may be able to deduct specific expenses from your home office space. Deductions vary in conjunction with the type of home business you run. The deductions fall into two specific expense categories.
- Direct Expenses: Anything directly related to running your business including cell phone expenses, office supplies, computer purchases, room décor, and storage space.
- Indirect Expenses: The indirect expenses are a percentage of your home expenses based on the size of your home office.
Telecommuting from Home
Along with deductions for your own home based office, you may be able to deduct expenses while working for an employer. The criteria for claiming deductions depends on varying factors, including:
- The home office must be terms of your employment
- Inability to perform your work duties without your home office space
- Employer does not provide another area for you to work
- Providing your own space is a requirement of your employer
Other terms and restrictions may apply to your telecommuting work space in your home.
Utilizing your home for work is ideal for your own business or telecommuting as part of your employment for an outside company. Deducting your expenses on your taxes enables you to save money. If you are unsure if your home office qualifies for a deduction, contact a Certified Public Accountant like those at Ernst Wintter & Associates. Our CPA’s are available to assist you in navigating the various deductions that may be available to you. Contact us today to schedule an appointment.