You’re filing your first federal tax return as a home business owner, and naturally want to take the home office deductions to which you are entitled. What you most definitely do not want to do is take a home office deduction to which you are not entitled, so you need to understand the difference.
The number one rule about qualifying for a home office deduction is that whichever part of your home you use as a home office must only be used by you and must only be used as a home office.
A Home Office, And Nothing But A Home Office
In other words, if your home office is in the den and you use it as a home office ten hours a day, but then flip the computer into game mode, or turn on the TV to watch the Tonight Show, bye-bye home office deduction.
The exception is that if your computer area in the den is used for nothing expect you home business–no games, kids in chat rooms, or listening to MLB–you can get a home office deduction equivalent to the cost of keeping that much of your den, say a space 4’x 6′–operational.
If you and your spouse each have a home business and use the same office, bye-bye home office deduction for both of you. You can get around this, if your home has the space, by having separate home offices in different rooms.
Every Little Bit Helps
If your 240-square foot den constitutes 10% of your 2400-square foot house, and your 24-square foot home office area constitutes 10% of your 240-square foot den, you can take 1% of your entire home expenses as a home office deduction.
It’s a good idea, just incase the IRS wants documentation, to take a time-stamped picture of your home office space, in case something happens during the year so that you have to move your home office operation to another area of your house. You’ll need to keep separate documentation for the different work areas if they are different sizes.
If you work for someone else and telecommute, doing your job exclusively from home, you can take a home office deduction, but you must be able to show that you do those jobs for your employer only at home and not at his or her facility. For more info see http://www.i-homeofficefurniture.com/Home_Office_Store on products and services.
If your home office computer accesses the Internet through your only home phone line, you may not deduct the cost of the phone line, because the IRS considers a home’s primary phone line to be for personal use. But if you have added business features like a 1-800 number or call waiting to your primary phone line, you can take the cost of them as a home office deduction.
Your best bet, however, in understanding what qualifies as a home office deduction is to consult with a qualified tax professional. You can get started with IRS Form 8829.
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