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Home Office Tax Deductions You May Have Missed

April is right around the corner and the tax deadline is looming. If you haven’t filed your tax returns yet, you’re in luck because we’ve found some deductions available to people working out of their homes you might not have thought about. Did you deduct all you could?

If your office space takes up 20% of the house, you can deduct 20% of your bills for utilities, homeowners insurance, homeowners association fees, security, and general repairs and maintenance. Mortgage interest and property taxes are deductible expenses if you qualify for home office deductions.

Check out the deductions we found to see if there is something you may have neglected to claim:

Phone and internet costs: If you have a business line in your home you can claim these costs in full. For your internet use you may be able to claim a percentage of these costs based on the percentage of your home used for business.

Utility costs: You may be eligible to claim a percentage of your water, sewage and electric costs.

Landscaping costs: If you have clients meet you in your home and you pay for landscaping because of it you may be able to claim a percentage of these costs as well.

Rent or Mortgage and Mortgage Interest: You can claim a percentage of these costs based on the square footage used for your business.

Outsourcing costs: In most cases you can deduct the costs associated with outsourcing for your business such as using a virtual assistant, writer, graphic artist or any other outsourced task. You can also still claim your home office deductions even if you outsource several tasks provided that you handle managerial and administrative tasks exclusively in your home. ***Another perk of using On Point Executive Center’s Virtual Office services!

Repair costs: If you have had to repair anything in the area used exclusively for business you can claim these costs.

Note: According to the IRS in order to claim a business deduction for your home, you must use part of your home exclusively and regularly as your principal place of business, or as a place to meet or deal with clients in the normal course of your business, or in any connection with your trade or business where the business portion of your home is a separate structure not attached to your home.

The rules are also different for home businesses serving as a daycare, farms and for homes where more than one person uses their home for business use. For more information on qualified home office deductions, visit the IRS website.

Direct expenses
Money spent to repair or maintain the business space is deductible. If you paint the room that is your home office, for example, the entire cost can be deducted. Although no part of the cost of the firs telephone line on your home can be deducted, the full cost of a special line for your business and other direct expenses—such as the cost of long distance business calls—can be written off.

Indirect expenses
These will probably be your most fruitful home office deductions. Because part of your home qualifies as business property, part of the costs of running it can be converted from non-deductible personal expenses to business write-offs. If your office space takes up 20% of the house, you can deduct 20% of your bills for utilities, homeowners insurance, homeowners association fees, security, and general repairs and maintenance.

Interest and property taxes
Mortgage interest and property taxes are deductible expenses if you qualify for home office deductions. But with a home office you convert part of those expenses from personal itemized deductions to business write-offs. Because business expenses reduce self-employment income, they can also trim what you owe in Social Security taxes.

Deducting rent, or depreciating
If you rent the home where your office is located, this computation is easy: You deduct the same percentage of your rent as the percentage of your home devoted to your business. If you own your home, you depreciate the business part of the house. Figuring the right amount to deduct is complicated (TurboTax will help) but you only have to do it once; then you’ll enjoy the savings year after year.

If you have any doubts on what you can or cannot claim ask your accountant.

Make sure you keep thorough records in case you are ever audited. If it is later determined that you claimed deductions that you didn’t actually qualify for you may end up paying additional taxes as well as interest and penalties!

Contact us today to discover more about our suite of virtual office services and to explore our beautiful office space in Tampa. Go virtual!

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