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Home Office Deduction
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Computing the Home Office Deduction
There are two types of deductible home office expenses:
- Direct expenses
- Indirect expenses
Direct Expenses
These are expenses that directly affect only the part of your home used for your business. For example, repairs done in your office or having it painted. You deduct 100% of these expenses.
Examples of Direct (deduct 100%):
- Painting and decorating the office
- Maintenance and repairs
- Hiring or furnishing maid service for the office
Indirect Expenses
These are expenses that relate to the entire home, such as, utilities, insurance, and rent. They must be allocated to the portion of your home used for your business.
For example, if you use 10% of the total square feet of your residence for your home office you would allocate 10% of the total annual cost of each indirect expense to your home office deduction.
Examples of Indirect Expenses:
- Mortgage interest
- Property taxes
- Telephone
- If you have only one line in your home you may not deduct the cost of the standard monthly charge. Keep a record of all business calls made from your home.
- If you have a separate line for your business, costs are fully deductible.
- Electric
- Gas
- Water
- Insurance
- Depreciation (for homeowners)
- Rent
- Painting the outside of the house
- Repairing the roof
- Monthly maintenance fee for an alarm system installed to protect all windows and doors.
- Depreciation for the business portion or your cost for the alarm system.
Next:
Home Office Deduction: How to Allocate Indirect Residential Costs to Your Home Office; Form 8829, Expenses for Business Use of Your Home
Related Links
- What is the Home Office Deduction?
- How to Claim the Home Office Deduction
- How the Home Office Deduction Works
- Ordinary and Necessary Business Expenses
- Qualifying for the Home Office Deduction
- Principal Place of Business Test
- Administrative and Management Rule
- Historical Note-Home Office Administrative and Management Rule
- Using Outside Services
- Employees With a Sideline Business
- Deducting Storage Space for Business Products
- Setting Up Your Home Office
- Separate Business Structure
- Steps for Computing the Home Office Deduction
- Illustration of Home Office Deduction Computation
- Day-Care Services
Copyright © 2008-2012 Larry Villano. All rights reserved.