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How to Preserve Your Home Office Deduction

8/20/2018

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Do you work from home? Frequently, you can qualify for home office deductions offsetting taxable income from a sole proprietorship or other small business. However, if you're not careful, one misstep can cost you your deduction.
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Rules around home office deductions
Generally, you may claim home office expenses only if part of your home is used regularly and exclusively as either:
  • Your principal place of business; or
  • A place to meet or deal with customers, clients or patients in the normal course of business.
Under the latest rules, deductions have been extended to business people like landscapers and painters who perform administrative duties at home while providing services at multiple locations.

Keep in mind that recent tax legislation eliminated the deduction for any miscellaneous expenses, such as unreimbursed employee business expenses, until 2026. That means employees can no longer deduct home office expenses if their offices are used for the employer's convenience.

If you qualify
You can deduct expenses directly attributable to the home office (e.g., business supplies) plus a portion of indirect expenses (e.g., utilities and depreciation) based on the percentage of business use.

For instance, if a room used as an office makes up 10 percent of the home and you end up with $10,000 in indirect expenses, you can deduct $1,000. Alternatively, you may claim a simplified deduction of $5 per square foot of office space, up to a maximum of $1,500.

Don't get tripped up by "regular and exclusive"
The sticking point may be the requirement for business use to be “regular and exclusive.” In other words, if you use a room or a portion of a room for your business, you can't use the same area for personal purposes. Although the IRS doesn't expressly require physical separation of a business part of a room, that certainly bolsters your position.

Suppose you use a computer in your home office both for business and personally. Technically, this taints your deduction because your business use is no longer exclusive. To be on the safe side, you might acquire another device for personal use and use the computer strictly for business.
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Questions about claiming the home office deduction? Call us and we can help you.

"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

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Phone: (630) 320-3720

Monarch Accounting Group Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527-7836
Email: Info@MonarchAccountingGroup.com


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  • Home
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