Home is Where Your Small Business Tax Deduction Is
GET TO KNOW THE IRS RULES
IRS Publication 587, Business Use of Your Home, spells out the rules under which you can take a deduction for using your home as your office, manufacturing facility or warehouse.
Your home office should be used:
-Exclusively and regularly as your principal place of business, or
-Exclusively and regularly as a place where you meet or deal with patients, clients or customers in the normal course of your trade or business.
"Exclusively" refers to the requirement that the part of your home that you use for business cannot be used for any personal reason. The IRS doesn't require that it be a complete room in a house, or that the space you use be partitioned. It does require that your home office or workspace be a "separately identifiable space."
If your computer and papers are spread out on the dining room table and you put them away when it's time to eat, you can't take the deduction. But if you have a corner of your family room that is clearly a home office, and your kids don't use it to do their homework, then you can qualify for the deduction.
The structure that you use the deduction for doesn't have to be the one you live in. A garage, shed or barn that you use as a studio, for manufacturing or for storage can also qualify. But, you can't also park your car in the garage, or house your lawn mower and other gardening equipment in the shed.
WHAT CAN YOU DEDUCT?
Part of your expenses such as mortgage or rent, insurance, utilities, maintenance costs and repairs can be deducted. The IRS allows business owners to deduct the portion of their home expenses that can be attributed to the office or work area. The most commonly used method is to compute the percentage of your home's square footage that is devoted to the business, and then multiply that amount by what you've spent.
Categories: Tax, QuickBooks, Condo, Audit, Accounting
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"Exclusively" refers to the requirement that the part of your home that you use for business cannot be used for any personal reason. The IRS doesn't require that it be a complete room in a house, or that the space you use be partitioned. It does require that your home office or workspace be a "separately identifiable space."
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