Do you work out of your home? If so, you may be eligible for a home office deduction on your federal income tax return. In past years, the IRS tended to audit taxpayers who claimed a home office deduction at a higher rate than other individuals, but the agency has since reduced the use of this practice. If you qualify for a home office deduction, now is the time to start claiming your rightful tax break! Here is a primer on claiming a home office deduction.
IRS Rules for Home Office Deductions
Before you can take this deduction, you need to learn about the IRS rules for writing off the business use of your home. First of all, you must work out of your home on a regular basis. If you're simply bringing work home from the office on occasion, you won't qualify to write off your expenses.
Another rule is that you must have a designated area that you use regularly and exclusively for business. If you tend to work all over your house, you can't claim this deduction. So, if you plan to claim a home office deduction, make sure you set up a room in your home that you will only use for work.
You should also keep in mind that you'll only be allowed to claim enough home office expenses to negate your income. This means that you can't deduct more of your expenses than the amount of your earnings.
How to Claim a Home Office Deduction
How do you write off these expenses? First, you'll have to measure the square footage of your home office and divide it by the total square footage of your home. When you get this percentage, multiply it by your normal home expenses such as electricity, phone service, insurance, and internet service.
Once you've calculated these expenses, you must file Form 8812 "Business Use of Home" to report them on the appropriate lines. At the bottom of the form, you'll total the expenses. Then, you'll need to transfer this total to Schedule C "Profit or Loss From Business" in order to claim it against your self-employment income. When you complete Form 1040, be sure to include both Form 8812 and Schedule C along with your completed return.
Claiming a home office deduction may seem like a difficult task, but it's actually a straightforward way to cut your tax bill. When you deduct these expenses, you'll be able to save on your tax return this tax season.
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