Home Office

The Home Office is an Office in which a personal residence used fully for business on a regular and daily basis. To be Tax Deductible, the Home Office must be the taxpayer's principal place of business (that is, where the majority of his/her work is performed) or used as a place to meet customers or clients and, if the taxpayer is not self-employed, must be used for the convenience of his/her employer.

Beginning in 1999, the principal place of business includes a place of business used by the taxpayer for the management/administrative activities of any business or deal of the taxpayer if there is no other fixed location of such business or trade where the taxpayer conducts substantial management/ activities of such business or trade. For a qualifying Home Office, the taxpayer may claim a part of utilities & a depreciation Deduction for the Office and any furniture & any other equipment. Upon sale of the Home, however, gain attributable to the business portion cannot be deferred.

FREE HOME BASED BUSINESS

Home Office Tax Deduction

Definition: The income Tax Deductions you're allowed to take if your Home Office passes the "exclusive use" text needed to qualify for the Deduction.

Working at Home you can get a break on your income Taxes, provided that your Home Office qualifies for the potential Deductions. There are just two things you must prove to show the IRS that your Home Office qualifies for Deductions on your Tax return. One is that you must show, on your Tax return, that you use your Home Office regularly and totally as your principal place of business. And now second is that you have to prove that it is the place where you meet with customers or clients in the normal course of doing business.

To qualify your Home Office as your principal place of business, you must spend most of your working hours in your Home Office & most of your Taxable business income must come from activities in your Home Office.

That is been harder to prove since the Supreme Court tightened this Tax definition in 1993. To meet this Tax test now, you must be able to show the IRS that your Home Office is your most important place of doing business or that you spend more time working in your Home Office than anywhere else. So first make sure you have Tax records of your activities at your Home Office & a log of the time you spend working at your Home Office.

One more thing is that you must have to prove that is part of your Home you use as your Home Office, which can be just a portion of a room as opposed to a whole room, and is used only for business. Two exceptions are if you're storing inventory or using a room to provide day care; then you can also Deduct the use of the space as part of your residence.

Here are some important things you may be able to Deduct if your Home Office passes the use test. (As always, consult with your accountant to make sure these apply to you.)