If you work from home rather than an office, you may be eligible for specific tax deductions, including the home office tax deduction.
As Tax Day nears, it’s a great time to get your paperwork organized. With all of the new tax laws and deductions, it’s important to know where you stand. What many people don’t realize is that if they work from home, they may get tax deductions, such as the home office tax deduction, among others. If you work from your home, keep reading to learn what you may be able to write off on your taxes.
The Home Office Tax Deduction
Perhaps the largest deduction you may have is the home office tax deduction. If a part of your home is used solely for the purpose of your employment, you may deduct some of your home expenses as they relate to your office. Notice that we said ‘solely for the purpose of employment.’ If you use your family room as your office, for example, it won’t count. You have to have an area of your home that you use only to conduct business and nothing else. If you do qualify, you may write off the mortgage interest, utility cost, and insurance cost for that portion of the home.
Anytime you buy equipment for your home office, you may deduct the cost. Again, the equipment must solely be used for business purposes. You may have a couple of options when writing it off including:
- Write off the full amount in the year that you purchased it
- Amortize the deduction over the equipment’s life
Think of things like printers, copiers, fax machines, or computers. Also don’t forget about little things like paper, stamps, writing utensils, calendars or anything else you buy specifically for your job.
If you travel either by car, train, or plane, to conduct business, you may deduct the costs. You may also include the cost of lodging or even car rental. Keep in mind, though, that you may only deduct the portion of the costs that your employer doesn’t reimburse.
If your job requires you to be on the phone, you may be able to deduct the cost on your taxes. Just like your home, though, you must be able to prove that the phone line is strictly for business use. If you use the phone for both business and personal use, you must differentiate between the two and only deduct the percentage of costs that pertain to your business use.
Keep Careful Records
Just like all other areas of your taxes – the IRS wants proof. Keep careful receipts as you are much more likely to be audited when you claim the home office tax deduction or any other business-related deduction than if you don’t.
Taking the tax deduction for working from home can be beneficial, as long as you do it the right way. Always consult with your tax advisor before taking any of these deductions as they do greatly increase your chance of an audit.