Friday, May 11, 2012

How to Reduce Taxes with a Home Office

Do you use part of your home for business? If so, you claim a deduction on your taxes!

Many taxpayers may be able to take a home office deduction when filing their federal income tax return next year. Listed below are some important things you should know when claiming the home office deduction.

* Generally, you must use part of your home exclusively and regularly: As your principal place of business OR as a place to meet or deal with patients, clients or customers.
* The amount you can deduct depends on the percentage of your home that you use for business. (Example: Total square feet of house ÷ Office square feet)
* Your deduction for expenses will be limited if your gross income from your business is less than your total business expenses.
* If you are self-employed, use Form 8829 (instructions for Form 8829 here) to figure your home office deduction and report those deductions on line 30 of Schedule C, Form 1040.
* Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for “the convenience of your employer.” If your employer provides an office and you choose to work from home, generally, this does not qualify.

For more information see IRS Publication 587, Business Use of Your Home

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