How to Set up a Tax Deductible Home Office

As an independent contractor or even as a freelance worker you can often claim your home office and supplies as a tax deduction. You will want to check with the IRS to verify specifics and individual regulations but here is a general layout of how to make your work space tax deductible.

Difficulty: Moderately Easy

Instructions

1. Separate your home office from living areas. Your work space must not be utilized for anything other than work in order to qualify as tax deductible.
   
   So, do not set up your business or work area in the living room, garage, personal bedroom or any area that is used by you or your family for any other reason or purpose.

2. Keep the receipts for any supplies that are purchased that are solely used for your home office. Some of these supplies include but are not limited to: printers; phones; fax machine; copier; ink cartridges; computer; software; pens; organizers and filing cabinets etc.
   
   For the purposes of tax deductions these items must be required for your home office and used solely for the purpose of the work done at home.

3. Make purchases separately. Never purchase personal and work supplies in the same transaction. You need your receipts to reflect that your purchase was solely for your home office and work otherwise you may lose the option to claim it as a deduction.

4. Consider setting up a business account to make purchases and pay any bills that are related to your home office. This makes it easier to show that it qualifies as tax deductible and you will be able to corroborate your purchases with a bank statement.

5. Set up separate phone lines (phone & fax) and internet connections in your home office. In order to claim these as tax deductible they must be used solely for work and not personal use outside of working.
   
   Ask your phone and internet company if you can have these set up under business lines or how to best show that these are separate from the services used for personal use so that you can claim them as tax deductible expenses.

Tips & Warnings

• Make sure you keep great records of all work expenses and payments received for work done.
• There are other stipulations for those who work from home as a company employee. Check with the IRS or a tax agent to find out what special steps you must take to qualify.
• Other restrictions may apply to those who only work occasionally
• Their may be maximum and minimums earnings stipulations that apply.

[magnadea]

on 5/15/2009 Good pointers, thanks! 5* and rec