You can deduct a home office if you use it exclusively for business. Calculate it two ways: allocate home expenses by square footage, or use the simplified method at $5 per square foot. A 100 square foot office nets $500 under the simplified method.
An area in the home used only for business and that could be walled off (does not have to be actually walled off).
$5 per square foot.
10 by 10 ft (100 square feet), resulting in a $500 deduction (100 sq ft × $5).
Just because you have a storefront or retail location doesn't mean that you don't qualify for the home office deduction. If you have an area in your home that you use exclusively for business and that you do the administrative work.
For your business, like keeping up with the books, the mail, doing marketing, things like that, you may qualify for the home office deduction.
Let's break that down a little bit further. An area exclusively used in your home means that it is not a combination area like a living room, couch or a dining room table. It needs to be a separate area that could be walled off. It does not have to be walled off, but could be. So if you have your office in a corner of a bedroom, for example, or in the corner of your living room, you can measure the square footage of that area and use it to qualify for the home office.
The home office deduction will then use a percentage based on the square footage.
Of your area or your home office.
Divided by the entire home square footage, and will use expenses for operating the home, things like utilities, homeowners dues, landscaping, cleaning, repairs. Those expenses then will be multiplied by the percentage of business use of your home. That is what one way to calculate. There is also an alternative that will allow you to take $5 per square foot times the area used for business to come to the home office deduction. For example, if your home office is 10 by 10ft, that means it's 100 square feet. If you use the standard allowance of $5 per square foot, that means you.
Have 100 square feet times $5 or a $500 tax deduction. So take home office deduction and see if in fact you do qualify. If you'd like help with these calculations and other ideas of how to reduce your tax liability, we're here to help. I'm Donna Bordeaux@pyopaccounting.com.
