If you work out of a home office, the IRS allows a home-office deduction for the part of your house that is devoted to your business. This can be a little tricky.
The agency says the space must devoted to your business and nothing else. Deducting the guest room where you use your laptop while watching TV won’t cut it. Your home office must be dedicated to your business.
The way to determine the amount of the deduction is to figure out the amount of square footage of your house as a percentage of the overall square footage of your home. The home office deduction is available not only to homeowners, but to renters, as well.
For a full explanation of tax deductions for your home office refer to the IRS’s Publication 587, Business Use of Your Home. It details:
- Requirements for qualifying to deduct expenses (including rules for storing inventory and product samples)
- Types of expenses you can deduct
- How to figure the deduction
- Records you should keep
- Special rules for daycare providers
- Tax implications of selling a home that was used partly for business.
What happens if your tax bill is bigger than what you can afford to pay? Biz2Credit can help you with working capital and other funding needs.