If you use part of your home for business, /www.inovavox.com you may be able to deduct certain expenses related to that space. The IRS allows two methods for calculating the home office deduction: the actual expense method and the simplified method.
The actual expense method is more complex, but it allows you to deduct a wider range of expenses. These expenses can include:
- Depreciation on the portion of your home used for business
- Mortgage interest on the portion of your home used for business
- Real estate taxes on the portion of your home used for business
- Utilities (electricity, gas, water, garbage) for the portion of your home used for business
- Home repairs and maintenance for the portion of your home used for business
- Rent or lease payments for the portion of your home used for business
- Home insurance for the portion of your home used for business
- Depreciation on furniture and equipment used for business
To use the actual expense method, you must keep detailed records of all of your home office expenses. This can be a time-consuming and daunting task.
The simplified method is a simpler way to calculate the home office deduction. Under the simplified method, you can deduct $5 per square foot of the portion of your home that is used for business, up to a maximum of 300 square feet. For example, if you use 200 square feet of your home for business, you can deduct $1,000 ($5 per square foot x 200 square feet).
To use the simplified method, you do not need to keep detailed records of your home office expenses. However, you do need to be able to prove that you use the space exclusively for business. This means that you cannot use the space for personal activities, such as sleeping, eating, or watching TV.
If you want to use the simplified method, you must make an election on your tax return. This election is made on Form 8829, Expenses for Business Use of Your Home.
The simplified method may be a good option for you if you do not have a lot of home office expenses or if you do not want to keep detailed records. However, the actual expense method may be a better option if you have a lot of home office expenses or if you want to deduct more than $1,500.
Here are some additional things to keep in mind about the business use of home simplified method:
- You must meet certain requirements to use the simplified method. These requirements include using the space exclusively for business and using the space for your principal place of business or for meeting clients or customers.
- The simplified method is a deduction, not a credit. This means that you can deduct the amount of the deduction from your taxable income.
- The simplified method does not allow you to deduct depreciation on the portion of your home used for business.
- If you use the simplified method in one year, you must use it in all subsequent years.
If you are not sure whether you qualify for the home office deduction or which method is best for you, you should consult with a tax advisor.
