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?
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.
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.
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.
qualify for this deduction, you’ll have two options: percentage of house, or
simplified square foot calculation.
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.
simplified square footage method, a prescribed rate is multiplied by the
allowable square footage of the office.
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.
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
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.