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When Can a Taxpayer Deduct Expenses of a Home Office?

Friday, July 1st, 2016 | Uncategorized | No Comments

Many taxpayers start looking for deductions at tax preparation time, and when all other deductions have been used, the taxpayer will oftentimes ask about deducting home office expenses. To deduct home office expenses, you must fall into one of three categories: Self-employed, telecommuting employee, and an employee working from home for the convenience of their employer.

If you are self-employed and work out of an office in your home, and if you satisfy the rules that govern those deductions, you may be entitled to a favorable home office deduction that is an above the line business expense that is subtracted directly from your gross income in determining your adjusted gross income.

For employees who telecommute, that is you work at home and communicate with your employer mainly by telephone, e-mail, fax, electronic data transfer, express mail services, etc. for the convenience of their employer, you may be entitled to a home office deduction.

Other employees who are required to maintain a home office as a condition of employment may be entitled to a home office deduction. The requirements are that the home office is necessary for the functioning of their employer’s business and the home office is necessary to allow the employee to perform their duties as an employee.

Home office expenses fall into two categories: Direct and indirect.

Direct expenses include those expenses related directly to the home office. Direct expenses include work done to get the room ready to be used as an office, painting, repairs, depreciation deductions for furniture and fixtures used in the home office, etc.

Indirect expenses include the properly allocable share of utility costs, depreciation, insurance, etc. for your home, as well as an allocable share of mortgage interest, real estate taxes, and casualty losses.

A tax saving deduction for those who qualify, you are encouraged to contact a qualified tax professional to assist you with advice about whether you qualify for the deduction of home office expenses and how much of these expenses you may deduct.

Allen A. Scott, CPA
111 East Broadway
Lenoir City, TN 37771
(865) 986-4035
allen@ascottcpa.com

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