H&R Block Presents – DO YOU HAVE A HOME OFFICE?
For self-employed taxpayers a home office can be a great tax deduction. However, there are strict rules that must be followed to qualify to claim office-in-home expenses. The area in your home you use for a home office must be your principal place of business, a place where you meet clients, or a structure used for your business that is not connected to your house. Furthermore, the area must be used exclusively and regularly for your business.
Exclusive use means the area is used only for your business. Any personal use of the area disqualifies it as a home office for tax purposes, however there is an exception to this rule for in-home daycares.
You must use the area in your home on a regular and continuing basis to meet the regular use test for a home office. Occasional use of the area will not qualify.
Deductions for home office expenses can be taken using the Actual Expense or the Simplified Method. To deduct actual expenses, you are allowed a deduction of home related expenses equal to the percentage of the home used for the office based on square footage. Deductible expenses include expenses such as insurance, utilities, real estate tax, general home repairs, and mortgage interest or rent. The simplified method is an alternative to calculating and substantiating actual expenses. In most cases, the deduction is figured by multiplying the square footage used for your home office by $5. The maximum deduction using the simplified method is $1,500.
Having a qualified home office can reduce your net income from your business by the amount of the deduction thereby saving income tax and potentially self-employment tax. A qualified home office is also beneficial because it makes business miles beginning from the home allowable which would otherwise be nondeductible commuting miles.
For more information about the office-in-home deduction, please call your local H&R Block office. In Manchester TN call 931-728-9462. H&R Block Has Your Back!
