7 Essential Rules for Claiming a Work-From-Home Tax Deduction
1.
This wasnt always the case, though.
The law nearly doubled the standard deduction.
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Youre allowed to deduct only the gross income you earn from self-employment, though.
It needs to be a separate space that you use exclusively for business.
The IRS requires that you have a space that you use exclusively and regularly for business purposes.
Same goes for if youre using that space to do your day job.
To avoid running afoul of the rules, be cautious about what you keep in your home office.
Photos, posters and other decorations are fine.
Even mixing professional books with personal books could technically cross the line.
You dont need a separate room.
There needs to be a clear division between your home office space and your personal space.
Suppose you have a desk area in that extra bedroom.
The space needs to be your principal place of business.
To deduct your home office, it needs to be your principal place of business.
But that doesnt mean you have to conduct all your business activities in the space.
There are some exceptions if you operate a day care center or you store inventory.
If either of these scenarios apply, check out theIRS rules.
Mortgage and rent arent the only expenses you could deduct.
But thats not all you’ve got the option to deduct.
Be careful here, though.
you’re free to deduct expenses only for the part of the home you use for business purposes.
Youll also need to account for depreciation if you own the home.
That can get complicated.
Consider consulting with a tax professional in this situation.
If yousell your homefor a profit, youll owe capital gains taxes on the depreciation.
You probably wont get audited if you follow the rules.
The home office deduction has a notorious reputation as an audit trigger, but its mostly undeserved.
Deducting your home office expenses is perfectly legal, provided that you follow the IRS guidelines.
Its essential to be ready in case you are audited, though.
Its best to shell out a little extra money now to avoid the headache of an audit later.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder.
She writes the Dear Penny personal finance advice column.
Send your tricky money questions to[email protected].
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