How to deduct home office expenses from taxes - ForumDaily
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How to deduct from the expenses of maintaining a home office

Фото: Depositphotos

Фото: Depositphotos

If you use part of your property for commercial activities, you are entitled to deduct from the tax the cost of maintaining such an office, regardless of whether you are the owner or tenant of any type of housing, including apartments and apartment trailers.

US Internal Revenue Service (IRS) offers several options for processing such a deduction from taxes.

Simplified version (Simplified Option)

For the 2013 tax year and subsequent years, you can use the simplified version (simplified optiona) calculate the amount of deducting taxes on home office expenses. The standard calculation method contains requirements for the provision of data on the distribution of funds spent on the office and justification of costs. Keeping such records may be too complicated and burdensome for small business owners, so the IRS has developed a new, simplified calculation in which the taxpayer simply needs to multiply a certain rate per office footage.

Standard Method (Regular Method)

Taxpayers using the standard method (which is mandatory for tax years up to and including 2012) must indicate and justify the actual costs of a home office. These costs include mortgage interest, premiums, utility bills, repair costs, and depreciation. When using the standard method, the amount of deducting expenses for a home office usually depends on the size of that part of the house that is used as an office. If you use an entire room or part of a room as an office, you need to determine which part of your house (as a percentage) is used for commercial purposes.

Deduction requirements (Requirements to Claim the Deduction)

Regardless of the calculation method, home office expenses can only be deducted if the 2 requirements are met:

1. Regular and exclusive use

You should regularly use part of your property for business purposes only. For example, if you allocated one of the bedrooms for doing business on the Internet, you can deduct the cost of maintaining this bedroom as a home office.

2. Primary business location

You must show that you use your home as your primary place of business. If you conduct business in a place outside your home, but also use part of your home regularly and exclusively for doing business, you have the right to deduct the content of your home office from taxes if this place is your business base.

For example, if you meet with patients, clients, or customers in your home during daily business operations, even if you provide direct services or sell anywhere else, you can deduct your home office expenses from taxes.

You can also deduct the cost of maintaining a separate autonomous structure, such as a studio, garage or barn, if you use it regularly and exclusively for doing business.

The use of housing for the business of an employee

If you do not work for yourself, but, at the request of your employer, use part of your home for business, you may also be eligible for tax deduction for the cost of maintaining this part of your home.

To do this, you must meet several criteria:

  • You must use housing to conduct business at the request of your employer.
  • You should not rent out any part of your property to your employer and use it for commercial activities.

A full explanation of the rules for deducting from taxes the costs of using your home for business can be found in Publication 587, Business Use of Your Home.

You can specify the cost of a home office and deduct them from taxes by using the 8829 form (Form 8829, Expenses for Business). Such a deduction from taxes is possible only for individuals.

Read also on ForumDaily:

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