Work From Home? Consider the Home Office Deduction

Work From Home? Consider the Home Office Deduction

Work From Home? Consider the Home Office Deduction

Whether you are self-employed or an employee, if you use a portion of your home for business, you may be able to take a home office deduction. Here are six things you need to know about the Home Office deduction:

1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly:

as your principal place of business, or

as a place to meet or deal with patients, clients or customers in the normal course of your business, or

in any connection with your trade or business where the business portion of your home is a separate structure not attached to your home.

2. For certain storage use, rental use, or daycare-facility use, you are required to use the property regularly but not exclusively.

3. Generally, the amount you can deduct depends on the percentage of your home used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

4. There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home to figure your home office deduction and report those deductions on line 30 of Form 1040 Schedule C, Profit or Loss From Business.

6. If you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be for the convenience of your employer.

Gary Levine is a practicing CPA from Richmond, VA. He serves as the Executive Director of Non-Profit Connection, a nonprofit organization that provides finance and accounting support exclusively to other nonprofit groups. Our website is www.non-profitconnection.org.

Remember, individual tax returns are due on April 18th this year. That's because April 15th, the date taxes are normally due, falls on a holiday. If you need additional time to prepare your tax return, the IRS will grant you an extesion of time to file the reuturn, however, any tax that is owed to the IRS for 2010 is still due on April 18th. You do not get an extension of time to pay your taxes for the previous year!

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