How to Claim a Home Office on Your Taxes

How to Claim a Home Office on Your Taxes

Working from home can have good and bad points.  One of the good points is being able to claim a home office for a tax deduction.  It’s always best to consult with an accountant in South Jersey before deciding to claim a home office, as you’ll need to make sure you are meeting all of the requirements.

There are 2 methods for claiming a home office deduction.

METHOD 1:  SIMPLIFIED OPTION

The simplified option can significantly reduce the recordkeeping burden by allowing a qualified taxpayer to multiply a prescribed rate by the allowable square footage of the office in lieu of determining actual expenses. The simplified option is effective starting on, or after, January 1, 2013 (filed beginning in 2014).

METHOD 2:  REGULAR METHOD

The regular method for claiming a home office (required for tax years 2012 and prior) requires a lot of recordkeeping and you must determine the actual expenses of your home office.  These expenses can include mortgage interest, insurance, utilities, repairs, and depreciation. When using the regular method, deductions for a home office are typically based on the percentage of your home devoted to business use.

Requirements for Claiming a Home Office Tax Deduction

Whether you choose the simplified option or regular method, there are two requirements for your home to qualify as a deduction:

  1. Regular and Exclusive Use.The part of your home must be used regularly and exclusively for conducting business.  An example of this would be an extra room to run your business, which would allow you to take a home office deduction for that extra room.
  2. Principal Place of Your Business.Your home must prove to be your principal place of business. If you happen to conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may still qualify for a home office deduction. You can view more details about this here:  Home Office Deduction.

There are some additional tests and requirements that you can view at the IRS website by clicking here.

You should see the professional advice of a certified public accountant.  They can properly assess your situation and determine whether you qualify or not.  Contact us today and we’ll be happy to assist you.

 

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