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Tax help: Can I claim a home office tax deduction?

If you use part of your home for business, you may be able to benefit from the home office tax deduction. This tax help can be used by individuals who are employees or who are self-employed. Claiming the home office tax deduction is a good tax strategy to employ if you are eligible because it allows you to deduct certain expenses that the average homeowner cannot. Deducting the costs associated with your home office helps lower your taxable income, and thus your overall tax bill. The home office tax deduction is an itemized deduction.

NOTE: Tax deductions lower your taxable income and they are equal to the percentage of your marginal tax bracket. For instance, if you are in the 25% tax bracket, a $1,000 deduction saves you $250 in tax (0.25 x $1,000 = $250). There are two main types of tax deductions: the standard deduction and itemized deductions. A taxpayer must use one or the other, but not both. It is generally recommended that you itemize deductions if their total is greater than the standard deduction.

According to the IRS, you must meet three main requirements in order to be eligible for the home office tax deduction. You must use a portion of your home exclusively and regularly:

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  • as your principal place of business, or
  • as a place to meet or deal with clients/customers in the normal course of your business, or
  • in any connection with your trade or business where the business portion of your home is a separate structure not attached to your home

Exclusive & Regular Use

In order to qualify for the home office tax deduction, the IRS requires that you regularly use a portion of your home exclusively for conducting business. In other words, you cannot put a computer in the guest room and call it a home office. You also cannot allow your children or spouse to use your office for their own projects. To be eligible, your home office must be a separate room or identifiable area from which personal activities are excluded. The IRS is very adamant about the exclusive-use requirement, although there is less clarity when it comes to the definition of “regular use.” Conducting business from your home office at least a couple hours every day is likely enough to satisfy the regular-use requirement.

Principal Place of Business and/or a Place to Meet with Clients

To be eligible for the home office tax deduction, you must demonstrate that you use your home office as your principal place of business. This means that the office portion of your home must be used significantly and consistently for business activities, or as a place where you meet with your clients/customers in the normal course of your business. Keep in mind, even if you also conduct business at another location, you can still deduct the expenses associated with the portion of your home that’s used exclusively and regularly for business.

In other words, your home office must be your principal place of business, but not necessarily your principal office. A separate or detached structure (such as a garage or barn) may qualify as a home office if it is used exclusively and regularly for business.

READ: Do you want to know the basic steps to building a budget? Check this out.

Expenses that Can Be Deducted

The home office tax deduction is a great tax strategy if you know how to use it. The IRS only approves of certain qualified expenses for this tax break.  To determine whether an expense can be deducted, there are 3 general rules:

  1. Only to Home Office — If an expense is related only to your home office, the entire cost is deductible as a “direct” home office expense.
  2. Entire House — If an expense pertains to the entire house, a portion of it will be deductible as an “indirect” home office expense.
  3. Non-Business Portion — If an expense is associated only with the non-business part of your home, it is not deductible as a home office expense.

Direct Expenses

Direct expenses are fully deductible under the home office tax deduction. These may include the cost to repair, upgrade, or maintain your home office space.

Indirect Expenses

These types of expenses may help you save the most money because they are associated with your whole house. Indirect expenses can include a portion of your heating, air conditioning, electricity, security system,homeowners insuranceproperty taxes, and even your monthly mortgage payments. For example, if your home office makes up 20% of your house, you can deduct 20% of your utilities bills under the home office tax deduction.

If you also work at another location, be cautious when claiming certain expenses under the home office tax deduction. Administrative duties (such as bookkeeping, recordkeeping, billing operations, making appointments, and ordering supplies) may qualify as deductible expenses, but your home office must be the only place where you can accomplish these tasks.

READ: Valuable tips on the future: How to manage your digital afterlife

Limits on the Home Office Tax Deduction

As with every tax break, there are limits to how much you can deduct for your home office. Note that the amount of your home office tax deduction cannot be more than your home-based business income. In general though, the more substantial your home business activities are, the greater your chances are for qualifying for the home office tax deduction.

For More Information

For more information regarding the home office tax deduction and business use of your home, please refer to the following documents:



Recommended by   Elizabeth Rosen grew up near Boston and comes from a family of financial planners. She attended Carnegie Mellon University in Pittsburgh, Pa. where she studied professional writing. After graduation, Elizabeth moved to San Francisco where she worked for several years as the senior writer/editor and content manager for an online company. She now lives in Los Angeles working as a financial writer for numerous websites and print newsletters.

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  • After the collapse of health care reform legislation in the House on Friday, Republicans in the Congress and President Donald Trump now must decide what’s next on their respective agendas, as the GOP tries to pick up the pieces from a very public legislative failure over an issue that had been their central political focus for the last seven years. Here’s the look from Capitol Hill. 1. The first big setback for the Trump agenda. You can try to downplay what happened, but there was little positive to take from this health care debacle in the House. “I will not sugarcoat this; this is a disappointing day for us,” said House Speaker Paul Ryan after the vote was canceled. President Trump tried to blame Democrats, but that rang hollow since the White House had done no serious outreach to the other party. With this setback, it’s even more apparent how little has been done so far by the GOP Congress with respect to the Trump Agenda. 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Paul Ryan is not on @POTUS' side – https://t.co/QVOHBDIKiT #KilledTheBill #FunFactFriday — Alex Jones (@RealAlexJones) March 24, 2017 3. Full repeal of Obamacare needs 60 votes in the Senate. If Republicans couldn’t muster a majority in the House – how are they going to get 60 votes in the Senate to really change the bulk of the Obama health law? The answer – they’re not going to do that any time soon. But full repeal was still the mantra from a number of Republicans as the House GOP health care bill went down the tubes on Friday. “I remain committed to repealing Obamacare and replacing it with conservative reforms,” said Rep. Jim Banks (R-IN). “Congress should take its time and pass a good bill that actually repeals ObamaCare,” said Rep. Ron DeSantis (R-FL). But the truth is, unless Republicans get 60 votes in the 2018 elections, an Obama health law repeal bill faces a difficult road in the Congress. I applaud House conservatives for keeping their word to the American people. 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Donald Trump said he would do it right away. But for years, I have been reporting – and taking flak for saying – that while the GOP had lots of ideas, they didn’t have consensus on any plan. And that was obvious as they desperately tried to stitch together deals at the last minute to keep the bill moving. It’s pretty easy to lob verbal grenades at the other party – it’s a little different to offer substantive legislation and pass it. Humiliating defeat for GOP after years to prepare. Real blow to their argument that they could govern if only given the chance. — carl hulse (@hillhulse) March 24, 2017 8. This was not a good week for President Trump. It started Monday with the FBI Director publicly confirming that not only was there an investigation of how Russia meddled in last year’s election, but also a probe of any links between the Trump Campaign and Moscow. The FBI chief also made clear there was no evidence to back up Trump’s claim that he had been wiretapped in 2016. And the NSA shot down talk that British Intelligence had helped with surveillance on Trump Tower. Meanwhile, the Trump travel and refugee ban stayed on hold the courts, despite Mr. Trump’s declaration that judges were overstepping their authority. Then the week ended with a health care thud. Tomorrow's cover: Trump forced to cancel health care vote in stunning blow https://t.co/53Po4iXVbM pic.twitter.com/lEQe5Qc22g — New York Post (@nypost) March 24, 2017
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