Home Business Tax Deductions

Many people are looking for ways to supplement their income or to replace lost income due to pay cuts, layoffs or even complete job loss. If you are in that economic situation perhaps you have decided to start or expand a business you are running from home? If that is the case you may want to check with the Internal Revenue Service about whether you and your home office qualifies for various tax deductions. You can take home business tax deductions if your office meets certain criteria. You will want to read through the Internal Revenue Service Tax Tip # 2009-53.

For you to take home-based business tax deductions your office must be the principal place you do your business or meet with clients. For example, you can not take home business tax deductions if you are an employee who telecommutes one day a week. As a regular employee you can not take this kind of deduction unless your employer has designated you a full time remote employee and does not reimburse you for any of the office expenses. If, however, you are self employed and you use a portion of your home for an office you can deduct the percentage of your mortgage or lease, utilities and taxes in proportion to the space of your office. If your office is ten percent of the total space of your house then you can deduct ten percent of the above mentioned expenses. You will need to use IRS Form 8829 to calculate your home office deduction and then report that figure on Schedule C line 30.

If you have a separate building or structure used in your business (garage for storage or as a shipping area) you can deduct all of the necessary expenses related to that structure. It no longer is an automatic audit for those who claim a home office deduction on their taxes. As long as you follow the rules spelled out by the IRS you can rest easy that your return will go through without a hitch. In addition to being able to take a percentage of your total home expenses for your office there are several additional business tax deductions you can take.

Since 2008 you can now deduct the full purchase price of any office furniture or equipment you have purchased instead of having to depreciate it over seven years using the IRS tax tables. You still can depreciate it over time if you want to have deductions over that seven year period, but you will actually achieve a greater tax benefit now by deducting it all because the IRS limit for this deduction was increased to a maximum of $250,000 from $125,000 in 2008.

Computer equipment and software has also been added to the one hundred percent deductible category without the need for depreciation. Make sure to claim all of your office supplies including ink and toner for your printers, paper, envelopes, paper clips, etc. Keep all of your receipts to back up your claim in a separate file. You can also deduct your own health insurance as a self employed business person, but not your spouse’s unless they are an employee of the business.


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