4 requirements for the home office deduction
1. The area in your home must be your principle where conduct your business and not used for ANY other purpose.
2. You see clients, patients, customers, etc. during your normal business hours at this location. The location doesn’t have to be a separate building but must be used in connection with your business.
3. You utilize the location for storing inventory, product samples, etc.
4. The location is used as a rental property, home day care facility, etc.
How do you claim your home office deduction? It’s all based upon the percentage of the home that you use for business purposes only. Also your deduction is limited if your gross income from the business is less than your total business expenses. Such expenses that are available for deduction include: utilities, property taxes, and dedicated telephone line(s) which can be deducted at 100%.
Fortunately since less than half of the estimated home business owners take the home office deduction, Representatives John McHugh, R-NY and Kurt Schrader, D-Ore, have introduced legislation which would create a standard $1,500 deduction compared to itemizing through the Form 8829. Will it pass is unclear, however the National Association for the Self-Employed estimates it will be about a $500 tax savings for those who aren’t using it currently. Until then, document, document, document.
For further information, review Publications 587, Business Use of Your Home, for which relate to Form 8829 of your Schedule C, Form 1040.
Dwayne J. Briscoe, Owner
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