The IRS allows certain deductions for home-based offices. These deductions have with qualifying criteria, and, if your figures are not what the IRS would consider in the “normal” range, it could trigger an audit.
You can only take deductions if you have dedicated a portion of your home that you use “regularly and exclusively” just for business. This means you cannot have a desk set up in your bedroom, where you sleep and store clothing, and claim a deduction for the bedroom as office space.
If you do have dedicated space, you must still meet an additional set of requirements. You must use this space (again “regularly and exclusively:”
How To Calculate Your Deductions
If your dedicated office is a stand-alone building on your property, its easy: you can deduct all expenses associated with the building. However, most work-at-home woman use a spare room or garage. To calculate your deductions you need to:
- Calculate the total square footage of your home.
- Calculate the total square footage you only use for your office.
- Find the percentage that the square feet used for your business is of the total square feet of your home.
- Use that percentage to calculate the percent you can take for deductions on utilities, insurance, mortgage, and rent.
IRS Forms to File Taxes for Your Home Business
The following forms are in pdf file format. To open pdf files, you need a pdf reader. You can download one for free, from Adobe. - Publication 587, Business Use of Your Home
- Form 8829, Expenses for Business Use of Your Home
- Form 8829 Instructions
- Schedule C, Profit or Loss from Business
- Schedules A&B, Itemized Deductions and Interest & Dividend Income Source:
IRS. “Home Office Deduction.” Access Date: April 24, 2008.
