The home-office deduction: What you need to know
Home Office Deductions
Minding the details
If you’re self-employed, the home-office deduction,
plus all your other deductible business expenses, can’t exceed your business income for the year. Any excess of expenses over income, however, can be applied in future years against self-employment income.
If you’re not self-employed but work from home for an employer for a significant amount of time, you’ll need to prove to the IRS that your home office is maintained for your employer’s benefit and convenience, not your own.
Further, your home-office deduction will be counted as a miscellaneous itemized deduction on Schedule A, rather than on Schedule C, where self-employed business owners calculate their
profit or loss. You can write off miscellaneous itemized deductions, but only if they exceed 2%
of your adjusted gross income.
Regardless of whether you work for yourself or someone else, to withstand IRS scrutiny in case
of an audit, keep pictures of your office in your tax file. Also retain records of utilities, mortgage
interest, real estate taxes, rent, insurance, bills and receipts for maintenance and service, and
other pertinent documents.
Crossing your t’s and dotting your i’s
Whether you’re considering working out of your home or you’ve had a designated workspace in the
home for years, make sure you learn and follow the IRS’s rules on what you can and cannot deduct.
Your tax advisor can answer any questions you may have.
Small Business Accountant Company, Pappalardo & Merrill are here to help with your accounting needs. Call Us Today at 603-382-8867