4 Common Questions About Home Office Deductions

home office deductionsDo you run your own business and work out of an office in your home? You could be eligible for home office deductions if you meet certain requirements. With the right planning, you can receive the maximum deduction for your home office expenses.

What expenses are tax deductible for a home office?

Direct expenses: the costs of painting and repairing the home office, depreciation deductions for furniture and fixtures, the cost of computers and other equipment in the year that they’re placed into service, and expenses for storage space to hold inventory

Indirect expenses: the portion of utility costs used for the home office, depreciation and insurance for your home, in addition to the allocable share of real estate taxes, mortgage interest, and casualty losses

Transportation expenses: the costs of traveling between your home office and other work locations if it is your “principal place of business”

Is my home office eligible for tax deductions?

You qualify for tax deductions if you meet any of these three requirements:

Principal place of business

Your home office qualifies as a principal place of business if it fulfills one of these requisites:

  1. Management or administrative activities: You use your home office for administrative or management activities of your business, as well as meeting certain other requirements.
  2. Relative importance: It is the most important place where you conduct business.

Meeting place

If patients, clients or customers physically come to the office to meet, you can be entitled to home office deductions.

home office tax deductionSeparate structure

It is in a separate, unattached structure (such as an unattached garage or workshop) on the same property as your home and used exclusively and regularly for business.

What are the home office deduction limitations?

The amount of your home office deductions is subject to limitations based on the income attributable to your use of the office, your residence-based deductions that aren’t dependent on use of your home for business (such as mortgage interest and real estate taxes), and your business deductions that aren’t attributable to your use of the home office. Any home office expenses that can’t be deducted because of these limitations can be carried over and deducted in later years.

What happens when I sell my home?

If you sell your home at a profit that contains (or contained) a home office, there may be tax implications.

I have questions!

For guidance on your home office deductions, contact us today to discuss your needs with our team.

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