OFFICE EXPENSES

Home Office

You may be eligible to deduct the portion of your home expenses related to your business through the home office deduction, however there are a few things you need to know: Your home office needs to be used exclusively for business. This means your couch, exercise room, and kitchen table don't count. Your home office needs to be a fully dedicated work space. Further, it needs to be used regularly for management and administrative functions. Use our diagram to help you determine if you would qualify for this deduction. If you are allowed to take the home office deduction you can take it in two ways, simplified and regular (see below for details).

REAL ESTATE AGENT

Rachel Realtor is an independent agent who has a separate room in her home (200 sq ft) that she exclusively uses to operate her brokerage business. She meets the requirements for the home office deduction and opts to take the simplified deduction. When Rachel prepares her tax return she would deduct $1,000 for her home office on line 30 of her Schedule C.

ENTREPRENEUR

A well funded tech entrepreneur operates her business out of the guesthouse of her primary residence. The guest house (1,500 sq ft) meets IRS requirements to be considered exclusively used for business. The entrepreneur has used Hurdlr to keep track of her home operating expenses, which totaled $15,000, and she can attribute 20% these costs to her guest house. When the entrepreneur prepares her tax return she would deduct $3,000 for her home office on line 30 of her Schedule C.

PROFESSIONAL SERVICES

Number Cruncher, CPA is a sole proprietor accountant who prepares tax returns from his kitchen table at night during busy season. He also uses his kitchen table to eat with his family and fold his laundry. Number Cruncher knows that even though he works from his dining room eight hours every night during tax season he is not eligible to take the home office deduction because this area of his home is not used exclusively in connection with his business.

AUTHOR / SPEAKER

Penn is a free-lance journalist who writes for a number of reputable publications. Penn has on office available to him at the headquarters of one of the publications he works with, he also works from home and from the coffee shop around the corner. Generally, as long as Penn considers the area he works from in his home as his principal place of business, he uses it regularly and exclusively for journalism activities, and he conducts mainly non-management and non-administrative functions at the other places he works, he could be eligible to take the home office deduction.

DEVELOPER / ENGINEER

Shane is a solo web developer who operates his business from his basement, which also has a large couch and big screen TV he uses to host football parties on the weekends. Shane conducts his business activities from a desk in the far corner of the room, which is separated from the main area by a large bookcase. If Shane meets the use requirements defined by the IRS, he could qualify for the home office deduction for the portion of his basement he uses exclusively for business purposes, even though his office does not have its own four walls.

HOW HURDLR WORKS FOR
ENTREPRENEURS

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INFORMATION ON DEDUCTING YOUR HOME OFFICE

If you use the simplified method, you can take a deduction of $5 per square foot for each square foot of your home used for business purposes (up to 300 square feet).
If you use the regular method, keep track of all your home expenses, including maintenance, repairs, utilities, real estate taxes, rent, etc. so you can deduct the portion of these expenses related to your home office. Use form 8829 to calculate your home office deduction.
If you use a home office to manage your rental property you generally cannot claim the home office deduction on your Schedule E.
Direct expenses that only benefit the part of your home you use for your business are usually 100% deductible.
If you elect to use the simplified method, you cannot claim any home depreciation for the portion of your home you use for business activities.

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