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Welcome to Your Future Success
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Monday, March 22, 2010

How to Claim Home Office Deductions

New rules were instituted in 1999 for claiming an office in home deduction on your taxreturn.  If you couldn't deduc these expenses under the old tax law, you may be able to do so now.

Recording the Deductions

1.  If you are self-employed, transfer the deduction to Schedule C.
2.  I you are an employee, transfr the deduction first to line 4 of Form 2106, if you are using it,o directly to e miscellaneous deductions section of Schedule A.

Qualifying for the Home Office Deduction

1.  Determine if your home office  used exclusively and regularly to manage or administer your business.  Make sure you have no other fixed location where odo the major managrial or administrative work.
2.  Verify that yourhome office is alsousd for the conveience of your employer if you are an employee rather than an independent contractoror sole proprietor.

Calculating the Deduction

1.  Use IRS Form 8829 if you are self-employed or Federal Worksheet 51A if you are an employee.
2.  Take the square footage of your office and divide it by the square fooage of your entire home to obtain the percentage of the costs you can claim.
3.  Keep records of utilities, mortgage interest, real estate taxes, rent, insurance, trash removal and security service payments that you made during the year.
4. Include gas ad electricity bills.  Use water costs only in the rare case that you use water in your business. (meaning...if you are involved in a business that calls for you to use water)
5.  Save bills for repairs and maintenance of the office or entire home.
6.  If you own or are buying your home, calculate your investment inte home, the purchase price and cost plus improvement expenses, nd then find out the market value of your home at the time you converted your space into a home office.  You need this information, because you are required todepreciate the office
7.  Follow the instructions on Form 8829 or the worksheet to calculate the deduction.

Until Next Time,

Jeane' Elliott Bennett

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