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Home Office Deduction, To Deduct or Not Deduct?
- 1. Home Office DeductionTo Deduct or Not Deduct? Jim Crimmins Traders Accounting
- 2. Updates To ensure you have the latest home office information subscribe to our free e-mailed newsletter. http://www.tradersaccounting.com
- 3. Business Use of Your Home The IRS says you can deduct it “With technology making it easier than ever for people to operate a business out of their house, many taxpayers may be able to take a home office deduction when filing their federal income tax.” IRS Summertime Tax Tip 2009-16
- 4. Qualifying for a Deduction You must use part of your home Exclusively and regularly as your principal place of business. Exclusively and regularly as a place where you meet or deal with clients or customers in the normal course of your trade or business. You must use a specific area of your home only for your trade or business.
- 6. You keep the inventory or product samples in your home.
- 7. You use the storage space on a regular basis.
- 9. IRS code does not define regular use.
- 11. Principal Place of Business To determine if your home is your principal place of business you must consider: The amount of time spent at each place you do business. The relative importance of the activities at each location. You have no other fixed location. where you conduct substantial administrative or management activities.
- 13. Keeping books and records.
- 21. Utilities
- 22. General repairs of your houseDeductible to the extent of the percentage of your office to the total size of your home.
- 25. Examples of Expenses If you use your home for business you can deduct: Insurance Repairs Utilities and services Security system Rent Mortgage interest and premiums Depreciation
- 26. Property Bought for Business Use You have three choices in how to deduct: §179 and deduct the cost. You can split the property between §179 and depreciation. You can depreciate the cost over a specified time period. You elect the section 179 deduction by completing Part 1 of Form 4562.
- 28. MACRS Depreciation must be taken.
- 30. Recordkeeping You must keep your records for as long as they are important for any tax law. Keep records to prove your home’s depreciable basis. Photograph the office – prove that it actually existed. Keep a blueprint of your home showing the office. Keep a time and work activity log.
- 31. Where to Deduct It depends upon your classification A self–employed person (Trader in Securities). An employee (C Corporation). A partner (LLC or Limited Partnership).
- 34. Further Questions? Traders Accounting 15396 N 83rd Ave Peoria, AZ 85381 800-938-9513 jcrimmins@tradersaccounting.com
Editor's Notes
- Incidental or occasional business use is not regular use.
- The same home office can be the principal place of business for two or more separate business activities. Each trade or business must be determined separately.
- Examples: Painting or repairs only in the area used for business, casualty loss
- Examples: Lawn care or painting a room not used for business
- The basis for depreciation changed from personal to business is the lesser of the following:The adjusted basis of the property on the date of changeThe fair market value of the property on the date of the change
- Deducting unreimbursed partnership expensesPlease see the following forms and instructionsSchedule E (Form 1040) Supplemental income and lossSchedule SE (Form 1040) Self employment TaxSchedule K-1 (Form 1065) Partners share of Income Credits and Deductions