Is Your Home Office Tax Deductible?
You can deduct certain expenses if your home office is the principal place where your trade or business is conducted or where you meet and deal with clients or patients in the course of your business. Your home office will qualify as your principal place of business if you use it exclusively and regularly for the administrative or management activ- ities associated with your trade or business. There must be no other fixed place where you conduct substantial administrative or management activities.
- A home office may qualify for deductions if you use it for administrative or management activities of your trade or business if there is no other fixed location to conduct such activities.
- The home office deduction is available to you whether you rent or own.
- If you rent, figuring your home office deduction is relatively simple. Just multiply your annual rent payment by the percentage of the total space occupied by the office. That prorated portion can also be applied to utilities, insurance, repairs and maintenance.
- There are limitations to home office deductions based on your income. The taxpayer must be able to itemize deductions, using Schedule A. The home office deductions - along with other miscellaneous deductions - must exceed 2% of your adjusted gross income.
- If home office deductions exceed net self-employment income, those deductions may be carried forward to the next year, again, only if the self-employed has sufficient net income.
- For telecommuters, the business use of an employee's home must be for the convenience of the employer, and the employee must not be renting the office space to the employer, and the employee must not be renting the office space to the employer.
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