The deduction for the home office for your business is one many people don’t utilize either because they are not aware of it, think it is too complicated because of additional forms to file with their tax return, or just don’t understand it.
For network marketers and others who conduct their business from home, this deduction allows people who meet certain requirements to deduct from their income a portion of their home expenses that would not normally be deductible.
* Home insurance
* Mortgage interest
* Real estate taxes
While mortgage interest and taxes are deductible in most cases if you itemize your deductions, deducting the portion allocated to your office as a business expense also saves paying the 15.3% self-employment tax on business income. In addition, these deductions are available to people who do not itemize their deductions. Specifically, if you are renting your primary residence, the odds are that you are not itemizing and filing Schedule A.
In order to qualify for the home office deduction, you must meet a few simple requirements. These are:
* The office must be the primary office for your business. Unless you have another office for this business, this will not be an issue.
* The area you are claiming for your home office must be used exclusively as your office and not for personal use
The other big benefit to claiming a home office deduction is that you are able to depreciate your office. Unlike the other expenses listed above, taking a deduction for depreciation invloves no out-of-pocket expense. This deduction would not apply to those renting.
I recommend a visit to the IRS website and download Form 8829 and look it over. Next time I will talk about depreciation – what it is and how it can work for you.