5 Tips to Help You Maximize Your Home Office Tax Deductions
Can you believe it? It’s that time of year again. Time to figure out how to make our tax deductions work in our favor so that we can either receive a tax return, or at least not have to pay the IRS back as much money as we would owe without them.
If you’re someone who has conducted the majority of your business from a home office setting, you’re probably aware of the fact that you are entitled to a few tax breaks. But, if you’re looking for some tips on how to maximize them to work in your favor, we have five solid suggestions for you below:
Do your research. One of the most important things to keep in mind when it comes to home office tax deductions is that there are certain things that the IRS may change on a yearly basis. In other words, it’s not wise to assume that what you did last filing year will qualify for this one. So, make it a point to go to IRS.gov and put “home office deduction” in the search field for the latest deduction guidelines.
Know what makes your home office “eligible”. There was once a time when people were hesitant about listing their home office as a deduction due to the fact that there were so many rules that it caused them to feel like they might risk experiencing an audit. However, as more people are working from home, Congress has relaxed their rules quite a bit. So long as you use a certain space in your house exclusively for administrative purposes and/or you have no other place where you conduct business, you can list a percentage of your home as a home office deduction. The main thing to remember is to provide the exact square footage of space that you use for business purposes as you factor it into your deductions.
Don’t forget to write off certain home expenses too. When you’re figuring out what to deduct, you can subtract more than just a percentage of your office space. You can also deduct a certain amount of your home expenses too. Say for instance you live in a 1,900 square foot home and you use 180 square feet of it to work in. This means that you can write off about 9.5 percent of your home expenses including rent, insurance and utilities. As a matter of fact, you can also include repairs and painting costs as well (being that you needed the repairs done in order to work, right?).
Understand how at-home daycare deductions work. If you’re a Work-At-Home-Mom who runs a daycare out of your house, there are many deductions that you qualify for. So long as you have a license and some form of registration to run a daycare, you can deduct whatever portion of your house is used for daycare purposes, including the kitchen and bathroom. The supplies that are a part of your daycare services including diapers, toys and baby gear can also be deducted. You can add to the list what you paid in licensing fees, classes, insurance and advertising costs. Plus, if you had to transport any children during daycare functioning hours, you can deduct the mileage that was required too.
Know which forms to use. As you may be in the process of figuring out the 2013 tax code, when it comes to filing your taxes, another thing to keep in mind is knowing which form to use. If you plan to claim the business use portion of your primary residence, use IRS Publication 551; if you are preparing to sell the house that you are claiming was partially used for business purposes, use IRS Publication 523 and if you are a telecommuting employee who wants to deduct your home office, use IRS Publication 2106. Trust us, when it comes to having your tax filing go smoothly, knowing where to file is as important as knowing what to file.
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