How to Make a Home Office Tax Deductible

Working from home has become more popular over the past few years. Corporate downsizing and stay-at-home parents have contributed to the rise of home-based workers. Whether you are self-employed or a work-at-home employee, having a specific office space allows you certain tax deductions.

Instructions

Difficulty: Moderately Easy

1. Make sure you use your home office exclusively for business purposes.
2. Install a separate phone line or keep records of business-related calls.
3. Calculate the percentage of utilities, maintenance and rental costs or mortgage interest associated with your business, based on the percentage of space of your home used for an office.
4. Deduct depreciation, supplies, office equipment and other business-related materials and supplies.
5. Keep detailed records and hold on to all business-related receipts.

Tips & Warnings

• Ask your tax professional to help you decide what is deductible and what isn't.
• If your office space is used for reasons other than business, keep a log of the hours you spend working.
• If you're an employee and your company doesn't offer you an office on-site, then you may use your qualify to take home office deductions.
• Don't set up a computer in the corner of your living room to pay bills or surf the Internet and claim it as a home office.
• The IRS says your home office must be the only place where you can execute administrative duties, such as billing, bookkeeping or ordering supplies.

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