Many taxpayers choose to run their business out of their home. This saves them money on renting out another space and the maintenance and utilities of another locations. And for many types of businesses, such as freelancing, having a building just for business doesn’t make sense. For these individuals, claiming home office expenses can be a great way to lower their tax bills this tax season.
The IRS allows for deductions on home office expenses for qualified individuals. Publication 587 contains 32 pages on home office deductions. While this publication is meant to help business owners understand how the home office expenses work with their taxes, this is a complicated piece of tax law that often leave taxpayers wondering what they are able to claim and how they can itemize their home office. Instead of risking a deduction that isn’t allowed or missing out on some great tax deductions, contact the professionals at Coastal Business Services.
How to Claim Home Office Expenses
Claiming your home office expenses can help to save you a lot. Often working out of the home means more money out of pocket that your employer will not pay for. Whether you are working remotely for a company or as a freelancer, these expenses can add up pretty quickly. When you find a qualified accountant, they can help you to deduct some of these expenses to save more money during tax season.
So how do you know whether you can deduct the prices of your home office? Our professionals at Coastal Business Services can help look at your business, and how you use your home for your business to determine if you qualify for this deduction. There are two main requirements that the IRS requires you to meet before claiming home office expenses on your tax return. These include:
The IRS also does not allow you to rent out the space in your home to your employer for your use. If you are receiving payment for working out of your home, you are not allowed to file for home office expenses on your tax return.
If you are unsure about whether the use of your home would fit under this deduction, the professionals as Coastal Business Services can help. We will discuss your home use in your business and help you determine if you can qualify for this deduction.
Simplified Deduction of Home Office
Once you determine whether or not your business qualifies for the home office expenses, you will need to pick one of two deductions to file. The first option is the simplified deduction of your home office. For this option, you will take the area of the office space (just the office space and not the whole home) and multiply it by $5 per square foot. The most you can take out for this kind of deduction is $1500. This means that if you have a large office, you will get a larger deduction and for smaller offices, you will get a smaller deduction.
Many taxpayers like this option because it is simple. They don’t have to keep as many receipts on hand and it usually is enough to help cover their expenses. While the maximum is not as much as you can get from a detailed deduction, this one is much easier to handle and is usually the best option for business owners.
Detailed Deduction of Home Office
In some situations, it may be beneficial to use a detailed deduction for your home office. This option allows you to claim more with your home office expenses during tax time. Coastal Business Services can help you fill out your Form 8829 to figure out the exact deduction you need. The calculations on this page will determine the amount of hours you use your home as well as how much area of the home is used in conducting your business. You will only be allowed to claim a percentage of these numbers in the deduction. With this option, you will be able to claim expenses such as:
Understanding the percentages that you can claim for your home office expenses can be difficult to figure out. Finding a tax preparer like the professionals at Coastal Business Services can take the guesswork out of these filings, whether you use the simplified or detailed deductions, and help you to get the tax break you deserve.
If you are unsure of whether the simplified or detailed deduction is best for your situation, we can help you look at
When you are looking for a tax preparer who can help you with all your tax needs, look no further than the experience of Dennis O’Brien from Coastal Business Services, LLC. Located in Farmingdale, NJ, O’Brien has been helping individuals and businesses get the tax breaks they need for years. Give us a call today at 732-996-0608 to get started on your taxes today!
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