Home Office Deduction

The home office deduction enables taxpayers that operate a trade or business from their home to deduct certain expenses associated with maintaining the home office.

The expenses related to the business use of your home include both direct and indirect expenses. Direct expenses include those expenses directly related to your home office, such as the costs of repairs, paint, or additional insurance for your office space. Direct expenses would include separate phone lines, fax lines, and internet connections used exclusively for business. Indirect expenses include those costs to operate your home. Indirect expenses include expenses such as the following:

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Real estate taxes

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Mortgage Interest

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Insurance

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Rent

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Repairs

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Security systems

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Telephone

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Utilities (Electric, Water and Natural Gas)

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Waste Removal services

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Cleaning services

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Depreciation

Note: You must provide the total square footage of your living space and the square footage of your office space. The percentage of deductible home office expense is calculated by dividing the square footage of the office by the square footage of total living space.

In the last few years, the rules for the home office deduction have undergone a number of changes. For instance, the statutes have become more stringent in regards to an "exclusive use rule," which states that business deductions are only allowed with respect to a portion of a home that is used exclusively and regularly for business purposes. In order to comply with the tax law, it is essential to stay current with these changes.

 

 

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