Can I Take a Business Tax Deduction For My Home Office?

My clients here in Las Vegas often ask me about taking a deduction for their home office. This can be a good deduction for small businesses, but one has to weight whether the deduction is worth the IRS taking a close look at the eligibility of your home office. Small businesses should refer to form 8829 for expenses for business use of your home. There are some eligibility requirements that the IRS requires you to meet they are as follows:

• Be a legitimate business – this is pretty self explanatory
• Your home should be your principal place of business, do you have other locations? Do you use that location a higher percentage of the time than your home office?
• Be used exclusively for your business

The next step is to determine the percentage of your home that is used for your office, for example lets say you use a room that is 10 x10 as your home office and your home is 2000 sq ft so 5% of your home is considered as office space. Next we now have to calculate the deduction; you will need to have at least an estimate of your profit. An important fact to keep in mind your home office deduction cannot turn your profit into a loss this will be disallowed it can however reduce your profit to zero. Then enter your expenses for casualty losses, mortgage interest and property taxes. The last step would be to multiply the percentage of my space used by the expenses and that would be my deduction. Usually the deduction is not huge but it all adds up. Before using or calculating any deductions you should check with your tax advisor to make sure it is applicable to your business.

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