Home office tax deduction mistakes

By Rhonda Campbell

An increasing number of Americans are working from home or telecommuting. Yet, everyone doesn’t file home office tax deduction expenses that they’re eligible for. Business mileage, home office furniture purchases and business entertainment costs are just a few home office tax deduction expenses that people don’t take.

Keep up with telecommuting and home office changes

It’s good to see employers and customers accept that you don’t have to work in a large office to be creative, develop products, hold conference calls or complete many other work functions. Early in my working career, it wasn’t that way. Workers were expected to commute into the office Monday through Friday, and this was after computers and the Internet were the rave.

Surprisingly, the increase in the numbers of people working from home is in the “employer for-profit” category. Global Workplace Analytics reports that since 2005, the work-from-home population (not including self-employed workers) has grown by 103%. From 2013 through 2014, the population of people working from home grew by 56%.

It’s also surprising that only about 22% of self-employed people worked primarily from home. Self-employed home-based businesses that are incorporated grew by 18.7% between 2005 and 2014. Some of the highest percentages were for the numbers of American workers who would like to telecommute part-time. A whopping 80% to 90% of workers prefer to work from home part of the time. Talk about a sweet setup.

Home office tax deduction write offs you may be eligible to take

To qualify for a home office tax deduction, you must regularly use a portion of your home exclusively for business. Working on the living room sofa or at the kitchen table generally doesn’t count. You may also qualify for a home office tax deduction if your home is a principal place where you conduct business. The IRS says, “If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction.”

If you work for an employer, you could qualify for a home office tax deduction so long as you don’t rent a portion of your home to your employer and you use a portion of your “for the convenience of your employer”. Types of deductions that you could qualify to take follow (This list is not all inclusive. It’s advisable that you check with your accountant or the IRS before taking a home office tax deduction.)

  • Storage of home office business products
  • Daycare expenses (this applies if you use a part of your home to operate a daycare)
  • Rent or mortgage (You could qualify to deduct a portion of your rent or mortgage. The amount that you could qualify for is generally related to the percentage of your home that you use exclusively to conduct business in.)
  • Utility expenses
  • Healthcare premiums (If you’re self-employed, there’s a good chance that you pay for all of your health insurance yourself. You may be able to deduct these expenses.)
  • Business mileage (The amount that you could deduct per mile can change. Check with the IRS to get the most current business mileage rates.)
  • Marketing expenses
  • Office supplies
  • Tax preparer fees
  • Licenses and regulatory fees
  • Business related hotel and travel expenses
  • Business liability insurance premiums

Keep receipts and detailed records of each home office tax deduction that you take. Keep these records for at least seven years. Not only is it a good record keeping tactic, keeping good records could help you to discover ways that you can save on overhead, reducing costs and raising profits.

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