Can I claim a home office deduction? Check out this article for business owners/entrepreneurs.

Many business owners may use part of their home as a business office. The following post has few key points that outline your eligibility to claim this business deduction on your tax return.

 1)    Regular and exclusive use:  In general, the part of your home used for business should be exclusively used for business.

2)    There are 2 methods to calculate your business deduction :

• Simplified method: You can claim up to 300 square feet @ $5 per square foot as part of your home office deduction.
• Regular method: You can also calculate a prorated percentage of homes exclusively used for business. Allocate all related expenses like mortgage interest, taxes & utilities you paid only for this business.

3)    Deduction limit: If your gross income is less than your expenses, then certain limitations may apply.

4)    Self- employed: If you are self-employed & choose the regular method, form 8829 expenses for business use of home can be used to calculate your business tax deduction. You can then report your income or loss using Schedule C- Profit or Loss from Business.

5)     Employees: Employees must also meet additional rules to claim this deduction. The business use must also be for the convenience of the employer. Many employers provide a yearly allowance for business use of your home. The employee can claim only if he /she has not been reimbursed by the employer for this expense. So ensure you review all the requirements before including it in your tax return. If you qualify, you can take this as part of Itemized deductions under Schedule A of your form 1040 Individual tax return.

If you require additional information or need consultation on your situation, contact a CPA or tax professional who can further assist.

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Posted In: Tax

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