When you work from home, you may be eligible for a number of tax deductions related to your business. What exactly you are entitled to will depend on the type of work you do from your home as well as how much. Many of these tax deductions are overlooked by people, so it is important to understand your eligible deductions so as to maximize your savings.
If you have an area in your home that is solely dedicated to your business, then you may be able to deduct part of your home expenses. The IRS typically requires that this section of your home is used “exclusively and regularly” as a place to meet with customer, clients or patients, as the principal place of business or in a situation where this portion of your home is separate from the other living areas.
A lot of people never consider this option and the deductions can be great. For instance, you can deduct the percentage of your home expenses that is the business. This may include interest on your mortgage payment, real estate taxes, utilities that include electricity, lights, cooling and heating and insurance premiums. It can also include repairs or maintenance to your home such as painting or cleaning services. You can even claim the depreciation on your home. One caveat by taking depreciation is that your capital gains deduction may be lower when you sell the home, and you may owe taxes then because of it. You can learn more about this deduction at the website of the Internal Revenue Service at http://www.irs.gov/newsroom/article/0,id=108138,00.html.
There are many more expenses that people who work from home often overlook when filing for taxes. If you use your computer to run your business, then you may be able to deduct it. Also, you may be able to deduct other expenses related to your business such as peripheral equipment like a monitor and printer and items that must be replenished such as printer ink.
Think about the other expenses that have created your home office. Your office furniture such as your desk and chair can be deducted. Office supplies such as paper, pens, pencils may also be deductible. Inspect your home office and write down anything and everything that you use for your home office to consider as a deduction.
Those who work from their home will often attend business seminars or other classes in order to hone their skills. You may be able to deduct these. If you travel for business, then consider travel expenses. Even business dinners and gifts to clients may be deductible, at least partially.
If you run a business out of your home, it may behoove you to seek a professional accountant to help you prepare your taxes. Make a list of all possible expenses that may be fully or partially tax deductible. By spending this extra time, you may see a greater refund in your mailbox come tax time.
Resources:
http://www.irs.gov/newsroom/article/0,id=108138,00.html
http://www.houselogic.com/articles/tax-deductions-when-you-work-home/
http://www.bankrate.com/finance/money-guides/work-from-home-deduct-your-home-office.aspx
http://www.legalandrew.com/2009/01/20/tax-deductions-the-home-office-deduction/