Home Office


Many people can deduct the cost of having an office in their home on their tax returns. Obviously, this would lower that amount of taxes you will have to pay.


The IRS rule is that the part of your home used for business must be regular and exclusive. That means that you must use it consistently as part of your business and it must be only for business use. If you have a room that doubles as a TV room or has a pool table in it, it is not considered exclusive and is therefore not deductible.


Business use of your home is deducted using IRS Form 8829. The form asks for the total square footage of your home and then the square footage used exclusively and consistently for business. This gives a percentage of square footage used for business.


You then can list the total expenses such as rent, utilities, repairs, interest, insurance and so forth and multiple it by the business usage percentage. You can then deduct the expenses that only apply to the business part, such as painting the office or office equipment. A percentage of your home can also be depreciated as an added deduction. There are some additional rules such as depreciation cannot cause you to have negative income, etc.


If you plan to deduct home office expenses, make sure that the area is clearly defined and used exclusively for business. If it is a separate structure, things are a little simpler. For example, if you repair lawn mowers in a shop building behind your house, the regular and exclusive issue is clearer than if you have a desk in the dining room.


For tax purposes, as well your own sanity, try to keep business and personal areas separate.