The federal tax deadline is barreling toward us. I thought I’d share what little I know and what I’m reading about deducting home expenses for those of us who have done just that this fiscal year.
It’s a great way to keep your home costs down, but, of course, the rules are a bit more involved than they might seem. Some great reading below:
This is all part of the game to reduce your overall taxable income, to keep more of it for yourself.
From Business Opportunities: Basic Rules for deducting a home office
First, you generally need to make sure your home office is used exclusively and regularly for business. The IRS offers the following example: Suppose you’re a lawyer and use your den at home to write legal briefs and prepare clients’ tax returns. Your family also uses the den for recreation. Because the den isn’t used exclusively for your work, you can’t claim the deduction on your tax return. [Source]
From there, it’s all about percentages. What percentage square footage is your office of your entire home or apartment? That’s the percentage you can write off of your monthly mortgage payment or rent. Hint: it’s probably not going to be even a quarter. So, if you pay $800 in rent, that would mean you could only write off $200 monthly.
You can write off percentages of your utilities, too, though, which is a plus. The Internet is something I rely on heavily for work, but your phone and others are opportunities to reduce your taxable income.
From CNN: Three rules for home-office deductions
For instance, you may not deduct the first phone line in your home, even if it’s your only phone line. That’s because the assumption is that your only phone is for personal use. You may, however, deduct the bells-and-whistles you add for business purposes, such as call-waiting. And you may deduct the cost of individual business calls. [Source]
So, thusly, early this year, I had two cell phones, one I kept for personal use, so I can deduct the purchase of the other phone and all of its related costs month to month. Later during the fiscal year, my contract ended, so I dropped the personal one, leaving me just one. That means, from then on, I can’t deduct all costs, but I can write off the extra cost of the unlimited plan, for which I opted because I spend so much time on the phone doing interviews and speaking to editors.
And then, all the details you’d ever want to know by way of the IRS. Below, watch some more on the topic.