Self-employed individuals often work out of their own home. If
this is the case with you, here's a primer on home office tax
expenses you can claim on your taxes.
Home Office Tax Expenses
America is a country built on small businesses. Yes, the big
companies are the darlings of the media, but the guts of our
economy are the little guys pursuing the American Dream from the
extra bedroom. Fortunately, the tax code contains deductions
tailored to help cut your tax bill.
When claiming home office tax expenses, it is important to keep
a receipt for each and every amount you are claiming. When
dealing with the IRS, receipts are your ammo. Keep them at all
costs.
When maintaining a home office, taxpayers often wonder how they
differentiate a business expense from a simply home expense. The
key is the square footage. Simply divide the square footage of
your office by the total square footage of the home. This number
is typically represented by a percentage such as 20 percent. Put
another way, the home office represents 20 percent of the square
footage of the house. Once you have the above answer, you can
multiply it by the total yearly amounts paid for rent or
mortgage interest, insurance, maintenance, utilities, taxes,
depreciation of the home and repairs. Each of these home office
tax expenses figures can then be deducted.
In addition to the above, you can also deduct expenses
completely related to the business. For instance, the purchase
of a desk for the office is entirely attributable to the office
and can be deducted in full.
Words of Caution
There are some limitations to home office tax expenses. If you
are reimbursed by an employer for various home office expenses,
you cannot also claim those expenses as a tax deduction. Sorry,
no double dipping.
For some time, there has been an urban myth that the Internal
Revenue Service keeps a close eye on home-based businesses. This
may have been true ten years ago, but is clearly not the case
today. To this end, the IRS has actually come out and issued
clear statements to the contrary. Do not fail to claim home
office tax expenses because of a fear of an audit. It is simply
not a rational fear!
Running a small business can be both stressful and incredibly
gratifying. Make sure you claim home office tax expenses to help
your cash flow.
About the author:
Richard A. Chapo is with
http://www.businesstaxrecovery.com -
recovery of business taxes through tax help and tax relief.
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http://www.businesstaxrecovery.com/articles to read more
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