Many people start home-based services or businesses after retirement. This is certainly more convenient than office-based jobs and, in many cases, even more profitable. Most people don’t realize that having a home office makes them eligible for a home office tax deduction. The important thing to know, however, is that the space must be completely and strictly used for business or office work. Dorothy Lawrence, the CEO of The Dorothy Butler Law Firm, believes that home office tax is among the biggest tax deductions.
Things You Must Know About Home Office Tax
Having a home office is not as simple as it may seem, says Dorothy. There are strict criteria for eligibility that you must completely adhere to. Here are some of the most important things Dorothy wants you to know when setting up a home office and requesting a home office tax deduction.
- Make sure you track all your expenses related to your home office. You should keep a record of things like home mortgage interest, property tax, utilities, homeowner’s insurance, annual maintenance, and upkeep.
- You can only dedicate a portion of your home for office work.
- The home office must be a separate and distinct room only used for office work.
- The home office cannot be a corner of your bedroom or the dining room table.
- The home office cannot be the guest bedroom with a desk in it.
- It must be a devoted office, or the IRS can disallow all expenses.
- You can have a home office if you are an employee, but the expenses associated with it are not deductible.
Certain complications often confuse people. For example, people don’t know whether or not they can deduct the expenses associated with an office that they rent from their income. Here are three basics situations Dorothy wants you to know about that will hopefully solve all of your confusion regarding office-related tax deductions:
- If you are a business owner, you are completely entitled to deduct any costs and expenses associated with an office that you own or rent away from home.
- If you own a home office, you are entitled to deduct a certain percentage of the expenses associated with your home from your income.
- If you are an employee, you are not entitled to deduct any costs associated with a home office.
How Can the Dorothy Butler Law Firm Help You?
The Dorothy Butler Law Firm assists business owners and partners in correctly claiming their home office deductions. If you own a home office or want to have one, Dorothy’s firm will help you make sure you are eligible for a home office tax deduction. She and her team will help you calculate the home office deduction on your tax return. Dorothy strongly recommends letting a professional financial attorney handle your home office deductions. The calculations can be very difficult and run a high risk of audit. The Dorothy Butler Law Firm also advises business owners on what expenses they can deduct that they may not realize they can deduct for their home office (cell phone, internet, etc.).