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School & Office
Home > School & Office > Topics:  Office General
How to Enjoy the Tax Benefits of a Home Office

Submitted by: Tip Hero  02/14/2011 1:11 PM
 
The benefits of telecommuting are many; from working in your pajamas to being able to run to your own fridge for a snack to not having to brave the morning and evening commutes during rush hour. In addition to these types of benefits, those who work from a home office are also eligible for a number of tax benefits. The Lending Tree Blog has outlined some of the benefits you could enjoy. Take a look:
  • Determine How Much Space Your Home Office Takes Up: firstly, determine the square footage of your home or apartment (you can usually find this in your closing papers or find out from your landlord). Then, measure your home office. Measure the whole room if the entire room is dedicated to work. If not, measure the space around your desk and filing space. Next, use the information to determine what percentage of your home is being taken up by your home office. You can then figure out what percentage of rent, mortgage, heat, electricity, etc. you spend on the office.
    If your home office is taking up 40 square feet, and your home has 2,000 square feet, the calculation would look like this: 40 / 2,000 = 0.02. Now you can use the 0.02 to determine your deduction. Multiply 0.02 by the amount you pay each month for your mortgage or rent. If you pay $1,000 a month on your mortgage, the result is 0.02 x 12,000 (12 months) = $240. Then, you can multiply the 0.015 by your heat and electricity. If you spend $200 a month on utilities, that's 0.02 x 2,400 = $48. Your total would be $288.

  • Make a List of Office Equipment: be sure to determine equipment you bought that is essential to your home office. You can deduct the cost of printers, computers, desks, chairs, supplies and more.

  • Determine Internet Usage: figure out how much of your home's internet use is for your home office. Then, multiply your yearly internet cost by the percentage and come up with how much your home office is costing you in terms of internet. Here's how Miranda from The Lending Tree Blog faired:
    85% of my home's Internet use is for my home business, so I multiply $479.88 (12-month cost) by 0.85 to get $407.90. Not bad - especially when added to my home office deduction and office supplies costs.

Read more about how you could possibly benefit from a home office at Tax Benefits of a Home Office.
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Comments:
 
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This is great stuff. There are a lot of small business owners out there that could use this benefit but don't. Even if it's a micro business that doesn't bring a lot of revenue...you should consider taking advantage of an in-home office for your business to get the tax advantages.
 
Posted by The Prudent Planner on February 15, 2011 7:51 AM
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In order to take a deduction for your home office, the room (or whatever portion of the room you're counting) must be "regularly and exclusively" used for work. If your home office, like mine, is also used for non-work-related computer use, then you can't count it as a home office, even if it's used mostly for that purpose. It doesn't make a lot of sense, but it's the IRS's rule.
 
Posted by haverwench on February 20, 2011 9:23 AM
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These rules have really changed a lot as of several years ago, before taking a deduction, be sure to read the current laws. They are much, much stricter than they once were. The days of putting a desk in a corner of a room and calling it a home office are gone!
 
Posted by Claudia on February 22, 2011 3:51 PM
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Correction: Home office expenses would be a percentage of mortgage interest, NOT mortgage payment, also property taxes, homeowners insurance, and utilities.
 
Posted by Dotcom on March 17, 2011 3:51 PM
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I would check with a REAL CPA(Not H.R.Blockhead) before trying to take any deductions, the IRS has cracked down on home offices. The days of claiming that corner in the spare bedroom is pretty risky. I think the room can't have a bed in it and it's supposed to have a door also, the home office has to almost be isolated from the rest of your home.
 
Posted by l.d.meyer on February 11, 2013 4:19 PM
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