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10 Oddball Tax Deductions

11 Most Overlooked Tax Deductions

Updated for 2011

Home Office Deduction

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Using Outside Services

The following activities performed outside your home office will not disqualify you from taking the deduction:

You use an outside service to do your billing or bookkeeping.
You perform some work out of a hotel or out of your car.
You choose to use your own home office for administrative and management activities even if suitable space is provided to you at other locations.
- Example: A client says you may use his office to do your administrative work. You choose to use your own home office instead. Your home office is still your principal place of business.
You may occasionally conduct a minimal amount of administrative and management activities at another fixed location.

Employees With a Sideline Business

If you have a job and operate a sideline business, using your home office for both your employer's business and your own will disqualify you from taking the home office deduction. Remember, your home office must be use exclusively and regularly for your own business.

Deducting Storage Space for Business Products

If you sell merchandise and use separately identifiable space in your home (or garage) for regularly storing inventory, you may allocate a portion of your home expenses to that space.

For example, if the house is 2,000 S.F. and the storage space is 2100 S.F., allocate 10% (200/2,000) of the total indirect home expenses to the storage space.

Setting Up Your Home Office

A desk, telephone with a separate line, files, computer, printer, and fax, are evidence that you are using the area for business. You may not use the area for nonbusiness activities. If you do, and the IRS finds out, you will lose your home office deduction. Again, remember the exclusive and regular use test.

If you use your den for office space, a partition would help to separate the business area, but it is not required.

Separate Business Structure

If you use a structure that is not attached to your home, for example a studio adjacent to your home, it doesn't have to qualify as your principal place of business or a place where your meet clients, customers, or patents.

However, the income limitation still applies and it must the facility must meet the exclusive and regular use tests. The income limitation if figured on Form 8829 where you determine your allowable home office deduction.

Home Office Deduction: Steps for Computing the Home Office Deduction

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