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Home Office - Deduction or Headache?

Tax Tips: The Home Office: A Deduction Or A Headache?

With unemployment at an all-time high, many out-of-work job seekers are setting up shop in their own homes. A home office allows you to deduct otherwise nondeductible expenses, such as utilities, depreciation, insurance and repairs. But, to take advantage of this deduction, you need to meet all of the very strict IRS guidelines. Be forewarned: the IRS reviews home office claims very carefully. To minimize your risk of an audit, and ensure success if your return is questioned, make sure you meet the qualifications for the home office deduction.

Qualifying for the deduction

The use of the home office must be:

A.1. Exclusive. 2. Regular. 3. For a trade or business.

B. In addition to the above requirements, the business part of your home must be:

Your principal place of business - which is defined as space where you regularly and exclusively manage activities for your business and have no other fixed location for this business, or

A place where you meet or deal with patients, clients or customers in the normal course of your trade or business, or

A separate structure (not attached to your home) that you use in connection with your trade or business.

For more information on the home office deduction, see IRS Publication 587, Business Use of Your Home.

Unscrupulous promoters have taken advantage of unwary taxpayers by selling various kinds of supposedly audit-tested tax savings strategies. The truth is the IRS is cracking down on such schemes, the individuals selling them, and the individuals claiming the deductions.

For more assistance this tax season, contact your local H&R Block office in Springfield or Bellows Falls.

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