If you work for yourself, either as a business owner or a telecommuter, you may be able to take advantage of the home office deduction offered by the IRS. If you are eligible for this special deduction, you could save a substantial amount of money on your taxes.
It is important to tread carefully, however, since the IRS has established some very specific rules governing just who may, and may not, claim the home office deduction. The tax agency also has some specific rules in place about what constitutes a home office. If the IRS finds that your home office setup does not qualify, the deduction you claimed could be disallowed, and that could cause you to owe not only back taxes but interest and penalties as well.
Many people are under the impression that simply claiming the home office deduction can trigger an automatic audit. This is simply not the case, and experts in tax law have found that returns with the home office deduction are not any more likely to get the extra attention of an IRS agent.
In order to qualify for the home office deduction, you must have a specific area in your home that is set aside for business and business alone. If you use a corner of your bedroom, or the kitchen counter, to do your business work, that would probably not qualify for the home office deduction. If, on the other hand, you have a dedicated room, or part of a room, that is used only for business, chances are you can claim this valuable deduction when tax time rolls around.
If you do qualify for the home office deduction, you can deduct expenses associated with running your home, including part of your mortgage payment, utility bills and other legitimate expenses. The amount of money you can claim depends on the total square footage of your home and the total square footage dedicated to your home office. That means if your home office takes up one tenth of your home you can deduct one tenth of the expenses associated with running your home.
It is a good idea to consult a tax expert about the home office deduction, particularly if you have never claimed it before. The rules governing this potentially valuable deduction are complex, and consulting an expert is the best way to ensure you do not run afoul of IRS guidelines.
To see if you qualified, check the tax deductions calculator and than submit quote request from top moving companies.