There are a few things you can claim, though, to help minimize the money you pay to the IRS. One of the biggest is your home office.
It may seem a bit soon to be thinking about tax season. But in reality, some planning now can reap benefits next April! So let's take a look at how to get the most out of your home office deductions.What is a Home Office?
As far as the IRS is concerned, a home office is a portion of your home set aside exclusively for business use. You must be able to show that your home office does not serve any other purpose, so you can’t claim the area around your kitchen table as a home office, even if that’s where you do the majority of your work.You must also be able to show that your home office is the principle place of business. If you rent an office outside the home, and only use your home office occasionally, you may not qualify for a home office deduction.
How a Home Office Deduction WorksGenerally speaking, your home office deduction will be calculated as a percentage of all the expenses you incur in your home. For example, if you’re using a spare bedroom as your home office, you would measure the square footage of the bedroom and divide that by the square footage of the entire home to determine what percentage of space you are using for business.
Using that figure, you calculate how much to deduct from your taxes for such things as:
- Mortgage interest
- Home repairs
More Deductions to ConsiderIn addition to your home office deduction and all it includes, don’t forget the things that actually make that room an office. Your desk and chair, filing cabinets, printer, computer, and everything else you need to operate your business are all deductible. Your accountant will be able to advise you about whether it makes sense to count these items as an expense or to depreciate them over a period of years, but do keep track of all money you spend on office equipment, as he or she will need to know.
When you’re self-employed, it can seem like you’re paying huge amounts of taxes. That’s because some of the tax burden used to fall to your employer, and now you’re responsible for all of it. Taking advantage of the home office deduction is one way to help offset those higher taxes, so be sure you’re claiming every square foot you’re entitled to.