Home Office Tax Deduction


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In today's presentation we are going to continue our hiring and managing series with a look thorough overview of how to deduct the home office tax for your small business. So let's get started

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Home Office Tax Deduction

  1. 1. Home Office Tax Deduction by FitSmallBusiness.com
  2. 2. If you use your home for business purposes, the home office deduction will lower your taxes substantially. Many taxpayers have overlooked this deduction in the past, because they thought it was too much work. For 2013 taxes IRS has made this tax deduction much simpler to use.
  3. 3. Instead of calculating the percentage of utilities allocable to the office, the amount of paint you used to update this space, or the amount of home mortgage interest allowed, the IRS is giving the option of choosing a standard deduction amount
  4. 4. The rules for use of a home office For 2013, there are two ways to do this: complicated and easy.
  5. 5. You need to qualify for what is known as “exclusive” and “regular” use tests. These two words are very important to the IRS in determining your eligibility. You must:
  6. 6. •Use your home office as your exclusive place for conducting business. If you have an office or desk elsewhere, you do not qualify for this deduction.
  7. 7. •This area must be used exclusively for business purposes. It cannot also serve as a playroom, kitchen, den or other household use. It must be a separate, identifiable space, but does not need to be partitioned.
  8. 8. •You must conduct your business on a regular basis. A business operated on an occasional business, or a nonbusiness use does not qualify.
  9. 9. If you have more than one business, and use your office for both businesses you can deduct the space only once--no double dipping allowed with the IRS. If one of the businesses has another principal office, you can deduct the home office for the other business without a principal place of business.
  10. 10. Exceptions
  11. 11. • Even though you have a principal place of business, you can still use the home office deduction if you use your home on a regular basis to meet with clients.
  12. 12. • If you have a separate structure, located on your home property for business needs, even though you have an office elsewhere, you can deduct the expenses. Remember - it must be used exclusively and regularly for business.
  13. 13. • You may use a space for storage of materials, and deduct that space, if there is no other storage space available. Remember the exclusive use test - this space must only be for storage and inventory or business materials.
  14. 14. Figuring the deduction
  15. 15. The Easier Way You simply measure the square footage of your home office space. That’s the only figure you need to measure for the 2013 tax year. You can now use this figure as a basis for your deduction. You are allowed $5 per square feet, up to 300 feet, with a $1500 maximum per year. For 2013, there are two ways to do this-- complicated, and easy.
  16. 16. So simply multiply the square footage of the area by $5.00 (240 sq. ft. x $5 = $1200). The IRS made this simplified option to reduce the recordkeeping burden on small businesses. For 2013, there are two ways to do this-- complicated, and easy.
  17. 17. The Complicated Way You may continue to keep track of utilities, maintenance, mortgage interest or rent, and deduct the business percentage on your Schedule C. For this you would take the total square footage of your home, and divide it by the percent used for business. The business percentage is what you use to calculate the business usage for the home office.
  18. 18. More information is available about the Business Use of Your Home in IRS Publication 587 at www.irs.gov . A great YouTube video, put out by the IRS, explains the new simplified option. Visit http://www.youtube.com/watch? v=zfY9zSZw2dI
  19. 19. And Finally...
  20. 20. To learn how to be a more successful entrepreneur visit us at....
  21. 21. (Click The Link Below) www.FitsmallBusiness.com