The home office deduction gets a bad wrap. There are so many rumors out about the home office deduction that you may want to avoid the whole subject. But if you have a home office and aren’t deducting it,Four Common Tax Myths All Home Business Owners Should Be Aware Of Articles you could be missing out on some very valuable op 순위 사이트 tax savings. Let’s take a look at the truth behind the myths about the home office deduction.
Myth Number 1 – The home office deduction is a red flag for an audit.
Twenty years ago, this might have been true, simply because it was unusual. Now, the home business seems to be almost as popular as home ownership! Millions of individuals operate some kind of business activity out of their homes. Others telecommute, and deduct their home office expense as an itemized deduction. The home office deduction is no longer an automatic flag for an audit.
The key to avoiding an audit is reasonableness. The IRS uses computer analysis on all tax returns. Any deduction that is excessive on your income and the benchmarks for your industry may be questioned.
Bottom line: Deducting a portion of your home expenses as a cost to operate your home-based business is expected!
Myth Number 2 – If I take a home office deduction, I can deduct all the costs of my home.
You deduct a portion of your home expenses as a home office expense based on the square footage of your home office space. If you have a 2000 square foot home, and a 200 square foot office, you could deduct 10% of your home expenses.
Unless you operate a day care center, your home office space must be exclusively used for business. Your kitchen will not qualify as home office space simply because you use the table to complete paperwork. If you use the space for personal and business, it does not qualify.
The easiest way to keep track of this is to designate a room or rooms for home office purposes. If you don’t have a complete room to use as office space, use furniture to separate the personal part from the business space.
Of course, there is an exception to this rule. If your business is wholesale or retail and you do not have any other fixed location, you can include any space you use for storage of inventory or product samples as part of your home office. This space does not need to be used exclusively, but must be used regularly, and be suitable for storage.
Bottom line: Calculate the square footage you use exclusively for business and the square footage of your storage space for inventory to determine your home office deduction.
Myth Number 3 – I can only take the home office deduction if I work at home exclusively.
Old rule! Congress expanded the home office deduction to allow business owners without any other fixed business location to take a home office deduction regardless of the number of hours they spend at home. If you provide services to customers or clients at their location, you can still qualify for the home office deduction. You simply must use your home office for administrative and management duties.
Bottom line: You can deduct your home office as long as you don’t pay for other office space to run your business.