Running a business out of the home office is a common way to cut down on business expenses that can also qualify you for tax savings. The government offers a deduction for the business use of a home that applies to self-employed business owners and employees who use a home office for the convenience of an employer. Some home office expenses are fully deductible, while others are only deductible up to a certain percentage based on the size of the office.
The way you use your home office determines whether you qualify for a home office deduction. According to the Internal Revenue Service, you have to use a home office regularly and exclusively for business or as a place to meet with customers and clients to take a home office deduction. This means if you use a room as an office but also use it for recreational purposes, home office expense are not deductible.
Fully Deductible Expenses
Home expenses directly related to the upkeep and operation of a home office are fully deductible. For example, the cost of painting and repairs made to the room used as a home office are 100 percent deductible. Other direct office expenses like the cost of office supplies, office furniture, long-distance phone calls made from a primary phone line are fully deductible. The cost of a second phone line is deductible if the second line is used exclusively for business purposes.
Partially Deductible Expenses
Home expenses that affect a home office and the rest of the home are partially deductible. General repairs that affect the entire home, homeowners insurance and utilities are examples of shared expenses that are partially deductible. The deductible portion of shared expenses is the percentage of the home used as a home office. For instance, if you use a room that accounts for 12 percent of your home's area as an office, you can deduct 12 percent of shared expenses.
Home expenses that do not affect your home office are not deductible as business expenses. For example, if you pay to renovate your kitchen or update a bathroom, the cost of the renovations are not deductible. Similarly, the cost of painting rooms other than the room used as a home office and expenses related to lawn care and landscaping are not deductible.
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