HOME OFFICE DEDUCTION
IRS Publication 587 Business Use Of Your Home contains valuable information for taking the home office deduction.
Below are some of the main requirements:
The home office deduction is available for homeowners and renters, and applies to all types of homes (single family home, duplex, town home, condo, mobile home, or a houseboat).
Requirements to Claim the Deduction are as follows:
1-Regular & Exclusive Use. You must regularly use part of your home exclusively or (100%) for conducting business.
2-Principal Place Of Business. You must use this area of your home as your principal place of business (meet with clients, customers, or patients) in the normal course of your business.
3-You can deduct expenses for a free-standing structure , such as a studio, garage, or barn as well if you use it regularly and exclusively for your business. The structure does NOT have to be your principal place of business or the only place where you meet customers, clients, or patients.
Two Methods Allowed To Figure The Home Office Deduction:
1-Actual Expense Method. You must keep records of actual expenses of running your home. These epenses are then broken down into either indirect expenses (which cover the entire home) or direct expenses (which cover only the part of the home used for business). Indirect expenses are deductible to the extent of the percentage of the home office space used while direct expenses are fully deductible 100% since they benefit only the home office area.
Formulas for figuring the home office percentage under the actual expense method:
Square footage of home office area divided by total square footage of entire home, OR
Number of roome used for home office divided by total number of rooms of the entire home
2-Simplified Method. Here you do not keep records of actual expenses. The IRS allows $5 per square foot, up to a maximum of 300 square feet to be deducted. Note you would use the square footage of your home office area but the maximum square footage allowed under this method is 300 square feet.
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