Federal Tax Deduction for Office-in-the-Home

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Federal Tax Deduction for Office-in-the-Home

Robert York – Individuals who utilize a portion of their home for business may qualify for a home office deduction on their Federal tax return. To qualify you must use part of your home exclusively and regularly as either your principle place of business or as a place where you meet and deal with patients, clients, or customers in the normal course of business.

Your home office may qualify as your principle place of business if you use it exclusively for administrative or management activities such as:

Home Office

  1. Billing customers
  2. Keeping books and records
  3. Ordering supplies
  4. Setting up appointments
  5. Writing reports
  6. Forwarding orders

Common expenses that may be deductible:

  1. Home mortgage interest (not otherwise taken as an itemized deduction)
  2. Real estate taxes (not otherwise taken as an itemized deduction)
  3. Rent
  4. Insurance
  5. Utilities
  6. Repairs
  7. Depreciation

Form 8829, Expenses for Business Use of Your Home, is used to claim this deduction.

The amount of the deduction is based upon the percentage of the area used for business in relation to the total area of the home. For example, if your home is 2,000 square feet and your home office space is 200 square feet, then the percentage used for business would be 10%. The deduction would be 10% of the qualified expenses.

You should consult with an accountant or tax preparer for details and other rules.

Robert York is a Business Advisor for the North Central Indiana Small Business Development Center, an organization with the mission to create a positive and measurable impact on the formation, growth, and sustainability of Indiana’s small businesses by providing entrepreneurs expert guidance and a comprehensive network of resources. Robert can be reached at ryork@isbdc.org

Robert York

Bob retired from the Internal Revenue Service after 30 years and now operates his own tax preparation business. He was employed by the North Central ISBDC as a business advisor from 2006-2013 and also taught various accounting courses at Indiana University South Bend from 2001-2012. He has an undergraduate degree in accounting and subsequently earned an MBA degree from Indiana University.
Robert York can be reached at ryork@isbdc.org.
Posted in: Taxes

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