Avoiding Home Office Tax Traps
If you are thinking about claiming a portion of your house as a “home office” here are some things that you will want to consider:
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If you haven’t already done so, you should talk with a Certified Public Accountant (“CPA”). They have the training and experience to advise you on the requirements and specific record-keeping practices that you will need to follow.
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Claiming a home office is very likely to increase your risk of getting an audit from the IRS.
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Equipment that you use in your claimed home office will need to be used 100% for business purposes.
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You will need to keep detailed records of how you use your home office.
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If you have been claiming a home office deduction, and you sell your home that was your principal residence for 2 of the previous 5 years, then this could have tax consequences for you when you go to sell your home (helpful accessories: home business tax deduction books; tax computation softwares).
However, as an alternative to claiming a home office deduction, you should talk to a CPA about other ways that you can legitimately deduct expenses associated with the work that you do from your home
For example:
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Deducting portions of your home utility bills.
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Deducting the costs of supplies that you use.
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Deducting a portion of the cost of your rent or home mortgage interest.
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