Can I Write Off My Home Office?

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I’ve been working as a freelancer for a few months from my home office. I’m ready to do my quarterly taxes, but I’m wondering whether I’ll be able to write off my office. How does the home office deduction work, and what else can I write off?

When it comes to tax matters, it’s usually best to talk to a tax professional. A CPA should be able to tell you whether you can use the home office deduction and help you find other deductions that will lower your tax burden.

According to the IRS, the home office deduction is available to both renters and homeowners. Contrary to popular belief, taking this deduction won’t necessarily trigger an audit.

In order to qualify for this deduction, you’ll have to meet two criteria: exclusive use, and principal place of business.

One of the biggest issues with taking this deduction is that you must be using your office exclusively and regularly for business. In other words, you can’t use this space for any personal use whatsoever. If you spend most of your day in the office for work, but then use the space in the evening for browsing the web or playing games, you won’t be able to take this deduction.

In addition to using the office exclusively for your business, you’ll also need to show that your home office is your principal place of business, or the place where you regularly meet with clients or customers.

If you qualify for this deduction, you’ll have two options: percentage of house, or simplified square foot calculation.

With the percentage of house method, you’ll measure the square footage devoted to your home office and figure out which percentage it is of the total area of your home.

With the simplified square footage method, a prescribed rate is multiplied by the allowable square footage of the office.

Along with the home office deduction itself, you can also write off office-related expenses. For example, if you purchased home office furniture during the most recent quarter, you may be able to write off the cost. Supplies, including paper, printer ink and even décor can be deducted.

Indirect expenses can be deducted. If your office takes up 20% of your home, you can deduct 20% of your utilities, security fees, homeowner’s insurance, homeowner’s association fees, maintenance and general repairs.

If you own your home, property taxes and mortgage interest are also deductible as long as you qualify for the home office deduction.

If you rent your home, you can deduct a portion of your rent. You simply deduct the same percentage of your rent as the percentage of your home that’s dedicated to your business.

One important thing to note here: make sure that you have records. If you’re writing off supplies, utilities and other home office-related expenses, you must have proof of these expenses. That means saving receipts and keeping them organized just in case you get audited.

If you do get audited and you don’t have records of these expenses, you’ll find yourself facing serious complications.

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