Are you a self-employed individual who performs most of your work from a special place in your home? Or an employee who works from home? If so, you may be able to deduct a portion of your household expenses on your income tax return.
The rules for qualifying for the home office deduction are fairly strict, but many taxpayers do have a space in their home that they use regularly and exclusively for business purposes. Keep in mind that although many of us log quite a few hours working from home, if you do have a normal office provided by your employer, this deduction will not apply to you.
So what types of expenses qualify for this deduction? Basically any costs incurred for the upkeep of your home. This will include mortgage interest, real estate taxes, rent, homeowner’s insurance, utilities, repairs and maintenance, homeowner’s association fees, and depreciation. You’re the type who doesn’t like keeping track of all those invoices and filling out forms? The IRS issued a simplified method to determine the deduction last year in which you simply take a deduction of $5 per square foot for the home office. This might be the preferred method for many taxpayers, but may not be the most beneficial since the maximum amount of deduction under this method is $1,500 per year.
Do you qualify for the deduction? Which method is right for you? Please contact us for answers to all your tax and financial questions.