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Do you Qualify for Home Office Tax Deduction for Small Business Owners and Professionals?
| Guest post by: Krutika Chheda |
Article Overview: For several years taking a Home Office Tax Deduction was considered a red flag, inviting the IRS to Audit your tax return. But that may no longer be the case, with more and more businesses and individuals taking advantage of working from home and maintaining a healthy work-life balance. IRS is well aware of the rising trend in working from home office. As long as you use the ‘Home Office’ as IRS defines it. This one tax deduction alone may save you several thousand dollars in tax. For example if you are an independent Information Technology contractor and mostly work out of your client’s office, however you use part of your home to manage the administrative aspects of your profession or business, you may qualify to take the Home Office Tax Deduction. IRS has specific rules to qualify Home Office Tax Deduction.
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Free Download - Top Tax Audit Traps for H1, L1 and Information Technology (IT) Consultants By Krutika Chheda |
Do you Qualify for Home Office Tax Deduction for Small Business Owners and Professionals?
There are three most basic qualifiers defined by the IRS for Small Businesses and Professionals to be able to take advantage of the Home Office Tax Deduction.
Rules to Qualify for Home Office Deduction
Trade or Business Use:
First of all you must be engaged in a trade or business to take advantage of this deduction. Employees can also take Home Office Deduction in certain situations. We will cover more on individual deductions for Employees in the next article. You cannot take a home office deduction if you are using it for an activity that is not your trade or business. For Example you use part of your home to review investment journals and carry out your personal investments. You are not a broker or a dealer, so your activities may not be considered part of a trade or business and hence you cannot take home office deduction.
Regular and Exclusive Use:
Specific area of your home must be used exclusively and regularly for your business or trade. You don't need a permanent partition to mark the space. For example you use part of your basement exclusively to perform administrative and management tasks of your business, review business paperwork, check online communications, teleconference with clients etc on a regular basis and not just once in a while. Your family does not use the same space for recreation or other non-business purposes. You may be able to claim costs associated with part of the basement as a deduction for use as home office, provided you qualify on other rules.
Exception to Exclusive Use Rule:
There are exceptions to the Exclusive rule. if you are in a wholsesale or retail trade and you use part of your home for Storage of Inventory or Product Samples and your home is the only fixed location of your trade, you can take the home office tax deduction. For example, if you sell cosmetic goods in an online store and use your basement to store samples and inventory, you may be able to take home office tax deduction. Even though you may use your basement for personal use, you can still take the deduction.
Principle place of Business:
You can have more than one business location for your trade or business including your Home Office. If your Home office can qualify as the Principle Place of Business, you can take the Home Office Deduction. For example you may have multiple retail outlet stores for your trade. However you use your home office exclusively and regularly for administration or management activities such as preparing financial and business performance reports, running payroll for employees, online banking, planning, marketing, advertising etc, you can take the home office tax dedcution.
Exception to Principle place of Business:
You may be able to take Home Office Dedcution, even though your home office may not qualify as Principle Place of Business. If you meet with your clients, patients or customers on a regular basis. Doctors, Dentists, Attorneys, Brokers, Consultants seeing clients patients at home generally meet this requirement. If you have a home based retail business wherein you organize a group of customers to get together and share your product samples with the intent to sell the goods, you may qualify for the home office tax deduction.
Day Care Facility:
If you are using part of your home as a licensed day care Facility for children or persons older than 65 years of age or persons that are mentally or physically challenged, you can take advantage of this Home Office tax deduction.
There are several other rules and definitions that IRS uses to qualify the Home Office deductions. If you are planning to take advantage of this deduction, I strongly recommend you take help from an expert tax accountant. The money you will save on the taxes will be well worth the professional fees.
Related Artcile:
How Much Home Office Deduction can I take? (Insert link to Next Article)
Home Business Tax Advantages
How much Home Office Tax Dedcution can I Take?
A Home Business Can Have Tremendous Tax Savings
Small Businesses and Professionals can Save on Taxes - Top Tax Deductions
Tax Tips for Small Business Owners
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About the Author: Krutika Chheda RSS for Krutika's articles - Visit Krutika's website Charlotte Accounting Services: We offer Accounting, Payroll and Tax Services to small businesses and individual professionals. Our combined 3-in-1 Accounting, Payroll and Tax package starts at $99 per month. Charlotte Tax Service: Our Charlotte office provides Federal and State Tax Retrun Preparation services for Small Businesses and Individuals in Charlotte Area. Federal and State Tax Services in Charlotte start at $349 for Small Businesses and $99 for Individuals. Charlotte Payroll Services: Our online payroll services start at $29 per month. Charlotte full service Payroll starts at $75 per month. Check out our Online Payroll Service in Charlotte. Click here to visit Krutika's website   H1 L1 Visa Holder Special Tax Situation Is your Accounting System Broken Top Tax Audit Traps for H1 L1 and Information Technology IT Consultants How much Home Office Tax Dedcution can I Take Small Businesses and Professionals can Save on Taxes Top Tax Deductions |
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2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto.
3. PADI: The Business of Diving Book
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It doesn't matter how successful you are in your business - it's always possible to learn something new.
In subsequent posts I give Table of Contents and brief descriptions for various titles - most of them devoted to the businesswoman - and sometimes a review. If anyone else has read a review, or has read the book and found it useful, please comment!
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A ton of Great Women
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These maybe the coldest franchises out there:
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WORST FRANCHISE LOAN FAILURES Failure %
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15 GOLF U.S.A. (RETAIL GOLF EQUIP.) 30.77%
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Exclusive: Interview with Results
- Hi Forum Members,
I'm helping start up a Business Coaching and Consulting company here in Toronto, Ontario, Canada (a Subsidiary of RSC Business in Los Angeles).
As a Research and Development Intern I am required to practice my listening and interview skills by surveying Small and Medium Businesses on thier Business.
This Survey is designed by RSC Business to also assist the Business being interviewed more insight into their own business.
I am looking to interview about 30 businesses across North America over the span of 3 months.
At the end of these interviews I will be publishing a report of the results and they will be made available for free to the Interviewees. The Report data will include responses from a minimum of 100 interviews.
I would like to extend this opportunity to members of the Forum.
If you would like to have this short 20-30 minute interview conducted on your Business and you reside in North America please send me an email or PM.
Please contact me at andy[at]jvprosperity[dot]com to arrange our interview and to get free access to the results when they are published.
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