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Office Space, Home Office Space that is IRS Approved |
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More people are working from home than ever before. It seems that almost every home has a home office space located somewhere. It may be in it's own room or the office space may be located in a section of the living room, family room or kitchen. The office space you use for business can be deducted off your taxes. However, the Internal Revenue Service (IRS) has guidelines set as to what qualifies as home office space and what does not count.
The first thing you need to do in order to determine whether your home office space is IRS approved is figure out the square footage used for the office space. You will need to know the square footage of your house as well. This way you can calculate the percentage of office space you are using. By setting the amount of square footage of the office space on top and the total square footage of the house on the bottom you now have a fraction that tells the percentage you need to know. An example would be a 12x15 small office space would be 180 square feet. The house measures at 3000 square feet. 180 over 3000 would calculate to be 6% of your living space is devoted to office space.
Now that you know the percentage of space your office space uses, that is how much you can deduct from the expenses of your household. This means that 6% of your electric bill, mortgage or rent, and other utilities can be claimed off your taxes. Many tax programs and tax preparers can figure the deductions for your home office space.
You do need to remember this is a home office space that must meet certain standards. Office equipment and furniture are normal items you will find in an office space. The playpen, toy box, and pool table do not fall under these categories. The home office space is not a part of the house that is shared with any other living area. It is acceptable to have it set up in a section of the family room or even a bedroom. However, this space must only be used as office space.
Purchases for your home office space should be kept separate from other purchases. Just because you are buying school supplies for the kids and add some office supplies as well, does not mean you will be able to deduct the entire receipt. It is just easier for your home office space purchases to be made separately so that if you are ever audited you can show exactly what you spend to operate your home office space.
The IRS guidelines state that the home office space must be the principal place of business and/or where you meet with clients or customers. This means that if you bring home some work from the office once in a while you do not have a home office space. Because you do mailers once a week for the office at the kitchen table does not mean you have a home office space. The home office space is for someone who meets with clients, like a mortgage broker or consultant. This person also works from home and only uses the outside office of his or her employer for checking in, dropping off work, or picking it up.
You may be surprised to learn that people who earn their entire income from companies like Avon or Tupperware can declare a home office space if it is properly set up and maintained. The tax deductions can surprise you. It is worth becoming more professional and set up a home office space just for the deductions alone. Following the guidelines listed above ensures that you have a home office space that is IRS approved. |
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