Taxes are something that we cannot completely avoid. Working with a skilled tax specialist, however, you can learn how to make the most of what you have. One thing you may have but haven’t been taking advantage of is a home office. If you do, you’re not alone. It is estimated that 26 million taxpayers in our country have home offices, and yet only 3.4 million claim deductions for a home office.
Many tax experts agree that taxpayers make a mistake by not claiming home office deductions. At the same time, there is understanding that the potential reason for forgoing tax breaks is the fear of a tax audit. We help our clients understand that first, we live in an age where many people work from home, at least on a part-time basis. As such, the home office deduction is not seen as a red flag by the Internal Revenue Service. Second, your experienced tax planner is well acquainted with tax laws surrounding the home office and will steer you in the right direction.
As long as the rules are met, there is little reason not to claim home office deductions
The first rule of the home office comes down to a word: “exclusively.” In order for a home office to be considered as such, the space must be regularlyused exclusively for work. This may be where you type transcription or where you meet clients. It must be used only for that purpose. A table in the dining room does not meet this requirement. At the same time, the requirement does not mean that you must have an entire room dedicated to work, just a dedicated area that is not used for other purposes, such as breakfast, lunch, and dinner.
The second major rule, mentioned above, is that the space allocated for work must be used regularly. Again, there is wiggle room in this requirement. The home office does not have to be used eight hours a day, five days a week. The home office that is used just once a week is just as qualified as the everyday office.
Aside from understanding the rules, there are other significant factors to consider before claiming home office deductions. For instance, additional taxes may apply if the home in which the home office is deducted is sold. Due to minute complexities in the home office deduction, the best way to determine if this deduction will be beneficial is to consult with an experienced tax specialist.
The clear benefit to claiming a dedicated space in your home as a home office is more money in your wallet spread out annually. The clear concern is opening the door to additional taxes all at one time for what you saved by taking the expense. Let Whyte and Associates help you navigate the maze of home office deductions. Call (909) 575-0080 today.