Tax Blog

March 9, 2009
How to Deduct Home Office Expenses On Your Federal Tax Return
categorized as: Tax Deductions

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If your home office is your primary place of business, then you probably already know that home office expenses are deductible on your federal tax return. What you may not know is how to include these deductions and your taxes and accurately reflect all the expenses you incur because you work from home.
One of the first things you need to do if you are considering deducting home office expenses on your federal tax return is to determine how much of your home is used exclusively for conducting business. If you have a separate room that you use as a home office, and that really is not used for anything else, you may use either the square footage of that room or the number of rooms in your house to figure out what percentage of your home is used exclusively for your home business. Many people are confused by the exclusivity rule. If you use a portion of the family den as your home office, and also use it as a den, then it may not qualify for a deduction as a home office expense.

Once you have determined the percentage of your house that is used for your home business, you may also developed utility costs, and even home repair costs, which impact that office. For example, if you put a new roof on your entire house and your home office is one of five rooms in the house, you may be able to deduct as much as 20% of the cost of the new roof as a business expense. However, trying to deduct a portion of the cost of your kitchen when the only way it relates to your home business is that you eat lunch there, will likely get you a date with auditors.

Another major portion of your deductible home office expenses are the utilities used and Internet or phone service. Unless you have a dedicated phone line for your business, you may not deduct the entirety of that expense on your federal taxes. But using the same rule as before, you may be able to do that 20% of your electric, gas, Internet, and phone bills as legitimate home office expenses.

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5 Responses

Fiscal Tax
02.24.2011
If you are claiming an Office in Home deduction (Form 8829), utility expenses will be identified on that form. If you are not using that deduction, utility expenses can be deducted on Schedule C.
Robert Fowler
02.24.2011
Under in-home offices expenses is utility expenses listed seperatly on a schedule c tax line or included in office expences on the form?
Dennis
03.17.2010
I search the net looking for this type of content to give me ideas on future articles that I am going to write on this same general subject. Appreciate reading your article and
thanks for the great content and information on Legitimate home businesses.
Dennis
http://yourdesiredlifestyle.com
Fiscal Tax
04.16.2009
You may deduct a portion of the new roof on Form 8829 - Office in Home. The new roof is considered maintenance/repair which is deductible on Form 8829. The deductible percentage is calculated by dividing the area used exclusively for the business by the total square footage of the house/structure. Keep in mind that depreciation of the house in which you have your office must be recaptured when you sell the home.
Jim Richardson
04.15.2009
I have a business inside my home which takes up half of the space in the building. I'm fairly certain you can't deduct a percentage of the cost of a new roof on your taxes. I looked into this and discovered a new roof like a new furnace, is considered a capital expense. You can amortize these expenses over the years but that's it. Please correct me if I'm wrong.

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