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Home Office Tax Deductions
Keep Your Home Office Tax Deduction Safe by Keeping the Correct Documents
This home office tax deduction can mean the difference between paying the IRS and getting a refund for many business owners.
Over 20 million people work from home in the U.S. and many of them will not take the deduction for their business home office simply because they will not take the time to document their expenses.
Don’t lose out on any of the your home business tax deductions.
It’s worth the effort to be able to take the home business tax deduction.
Keeping your records is necessary because the home office tax deduction is easily disallowed if you are not able to produce the correct documents.
The home office tax deduction is based on the percentage of your home that you use as office space. You will need to know the total square footage of your home and the square footage of your office space. This will include the space where you handle your administrative tasks, storage space and the area where the actual “work” the business does is performed.
You should measure all three of these spaces to figure out the total square footage of your office space. Let’s say the square footage of these three areas equals 400 square feet. Let’s say the total square footage of your home is 4000 square feet so the business use percentage of your home would be 10%.
This number is important because you will be able to deduct 10% of your home’s monthly expenses. If you are renting your home, you would be able to deduct 10% of your rent and 10% of your utilities. If you purchasing your home, you would deduct 10% of your mortgage interest, real estate taxes, utilities, home insurance, repairs, security system, home owners association dues, pest control and depreciation of your home.
Here’s the list of documents you will need to substantiate your home office tax deduction:
1. Settlement statement from the closing of your home sale…this tells the sales price of your home and the amount your depreciation deduction is based on.
2. Current Year Mortgage Statement
3. Property Tax Statement
4. Utility Bills (Gas, Electric, Water, Sanitation, Internet)
5. Proof of Home insurance payment
6. Receipts for Office Repair/maintenance such as painting, pest control and carpet installation.
7. Receipts for repairs that cover the whole house like heating/air conditioning system and roof
8. Receipts for Office furniture like desks, chairs, bookcases and file cabinets
9. Receipts for Office equipment like computers, printers, faxes, etc.
10. Receipts for Office Decor–Plants, paintings, posters, knick-knacks
To find out what square footage of office space you will be able to write off and how to claim it properly as the home office tax deduction, check out chapter 7 of my ebook, “Pay Yourself Instead of Uncle Sam!”.
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home office tax deduction
Write off your home office….
If you operate your business out of your home, you are entitle to a deduction based on the percentage of office space you are using. For instance, if you use 10% of your home as office space, you can write off 10% of your rent or mortgage, utilities, insurance, real estate taxes, home security, pest control, and depreciation of the home.
I have great chapter on home office deductions in my ebook, “Pay Yourself Instead of Uncle Sam”.
All the best,
Larisa