Few things are certain in life except for death, taxes, and losing an eBay auction at the very last second every single time. When the time comes to pay those taxes that are a certainty, many people who work from home overlook the ability to make a home office tax deduction. In the past, home office tax deductions might raise a red flag with the IRS and could lead to an audit. Nowadays though, more and more companies are finding it feasible and economically responsible to work from home so there is no reason not to take advantage of these tax breaks waiting for you. Also, if you are self-employed with your own business out of your home, you’ll want to write off as many things as possible to limit the amount of money you have to pay into the man.
When you work from home, there are a number of things you can write off including heating and cooling bills, rent, insurance, Internet bills and the occasional eBay auction if it’s business related. There are a few things to know though in regards to how you can write these things off and just how much can be deducted. There are also two types of filing statuses:
Regular Use Home Office Tax Deductions
Regular use is a minimal deduction that those who do any work from their home can claim. You must use some part of your home on a continuing basis to conduct business. For instance, if you work only 1 or 2 hours a week from home but over the course of the entire year you could claim a regular use deduction. On the other hand, if you sell only one Star Wars figurine on eBay that somebody comes in at the last second to steal from its rightful high bidder, you probably couldn’t claim a regular use home office tax deduction.
Exclusive Use Home Office Tax Deduction
Exclusive use deductions are harder to come by but they offer bigger kickbacks when you qualify. In order to be eligible for this tax break you must use some area of your home exclusively for business. For instance if you have a home office you must use the area only to conduct business pertinent to your home occupation. You can’t hold fantasy football drafts, Pinterest meetings, or purse parties if you want to honestly fill out the proper tax forms…of course I won’t tell if you don’t.
Storage Deductions – Home Office Tax Write Off
If you do sell action figurines or purses online, you can also write off the area that you store your merchandise in addition to your home office. The best thing is you can also store other things in that area as long as a majority is filled with your business items. For instance, if you have a storage unit filled with luxury knock-off purses, you can also store your 6-foot Valentine’s Vermont Teddy Bear without breaking the tax rules.
The amount you can deduct is correlated to the percentage of your house used for your home business. If you live in a mansion and only use a broom closet and a laptop for your business and best laptop for accounting for all accounting students you might see minimal returns on a home office tax deduction. On the other hand, if half of your studio apartment is used for an office and inventory storage than the amount you pay into the IRS will be quite minimal.
Another thing to remember is that if you work from home for a company as an employee, the reason for you working from home must be at the discretion of the employer. If you work from home only as a convenience to yourself, you might not qualify for a home office tax deduction.
The best thing you can do to qualify for a home office tax deduction is to save all your receipts during the year. Even things such as gas money, groceries, furniture, maid services and more could essentially be written off as a way to better your home work environment.
Tax time can be very stressful for the self-employed but by utilizing some of these tips, you’ll pay in less or actually get some extra spending money back…enough to boost your maximum eBay bid amount to avoid losing out at the last second.