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How Do I Take a Home Office Expense Tax Deduction?
There are two ways that your home office expenses can qualify for tax deductions: Your home office must be used exclusively and regularly as your principal place of business or the place where you meet with your client, patients, or customers during the normal course of business.
How Can my Home Office Qualify as my Principal Place of Business?
In order for your home office to qualify as your principal place of business, you must spend most of your working hours at that place and the majority of your taxable business income must be generated from activities conducted at that place.
What Expenses at my Home Office Are Tax Deductible?
There are several types of expenses at your home office which are classified as tax deductible:
- tax return real estate tax
- mortgage interest
- operating expenses
However, it is more complicated than just simple deductions for all expenses. You must use the following methods to determine your allowable total for tax deduction:
- If the rooms in your home office are not equal size, divide the number of square feet used for home office space by the number of total square feet of your home. The resulting percentage is applied to your tax deductible expenses.
- If the rooms in your home office are the same size you may base your home office tax deduction on a comparison of the rooms used for home office space against the total number of rooms.
Are there any Limits on the Amount I Can Deduct?
You may not take tax deductions that exceed the total amount of the net income gained from your home office use after the mortgage interest, real estate taxes, and any casualty or theft losses are taken away. If you have no income to claim, any tax deductions may be carried forward to the next taxable year.
Do I Need a Lawyer to Help Me with My Income Tax Problem?
Tax law is a very complicated and frustrating subject. To make matters worse, tax law changes every year. An attorney can help you understand current tax law and how it affects your income tax problem. If you have questions regarding the deductibility of your expenses, or you need to go to tax court, an attorney can represent you and help minimize your income tax bill.
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Last Modified: 11-28-2011 04:30 PM PST
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