What Expenses Can I Deduct For My Home Based Business?admin
A growing number of entrepreneurs manage their business from home for the convenience and the cost savings. As such, the IRS has taken note of this and has scrutinized home office deductions. Still, for those that have legitimate expenses and maintain proper documentation, there are several deductions that you may be eligible to claim on your tax return.
What home business expenses can I deduct?
In order to claim a home office deduction, you must regularly and exclusively use a portion of your home for your business (reference: IRS Publication 587). Generally, you can deduct the business portion of these expenses: real-estate taxes, qualified mortgage-insurance premiums, deductible mortgage interest, rent, casualty loss, utilities, insurance, depreciation, security systems, and repairs. You can also deduct expenses associated with a separate free-standing structure that you use exclusively and regularly for business.
How do you calculate the business portion of these expenses?
You would divide the total amount of square feet used for business purposes by the total square footage of your home. For instance, if your business office was 500 square feet and your entire home was 1,000 square feet, you would be able to treat 500/1,000 or 50% of your rent expense as a business expense. Please note that the business must be up and running to treat this expense as business expense. Therefore, if you launched your business in September, you could claim only the business expense from September onward.
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