With a major shift in business over the past year due to the global pandemic, many people have found themselves working from home. Especially small businesses.
Having to transition a corporate office to a home based one proved to be not only efficient and cost effective but extremely beneficial all around.
So, what does that mean for you tax wise as a business owner?
It means, if you worked or are working out of your home for business you may qualify for home business tax deductions.
Let’s take a closer look.
WHAT IRS REQUIREMENTS WOULD QUALIFY A HOME BUSINESS FOR DEDUCTIONS?
Well, first you must meet certain government requirements. Under the IRS guideline, there are only two ways a business can qualify for any type of home based deductions:
1. It has to be used regularly and exclusively.
2. It must be the principal place of your business.
WHAT TYPES OF DEDUCTIONS COULD YOU CLAIM?
With your home based business there are several different deductions available for you to claim.
Hereś a few you can qualify for:
Home office-related deductions (is available to both homeowners and renters)-To get this number you need to divide the area used for your business by the total area of your home.
Homeowners association fees, if applicable;
Cleaning services or supplies for your business space;
Mortgage insurance and interest;
Utilities-including electric, heat, phone and internet;
Repairs and maintenance-Direct (which benefits your home office) and indirect (which benefits your entire home). For example, if you spend $200 to fix a window in your home office, you can deduct the full $200 on your taxes. If you spend $3,000 to fix a leak in your room, you can only deduct a percentage of that expense equivalent to the percentage of your home used for business;
Office supplies-computer, printer, furniture and other things needed to run your office sufficiently.
BUT you must make sure you are careful in what you are claiming as not to cause the IRS to look twice at you for an audit.
Taxes can be a difficult and frustrating process to tackle. One of the most complicated aspects is determining what deductions you are able to take for your home business.
But you don´t have to go it alone!
Consult with an accountant or financial profession to determine what deductions you are eligible for.
Contact me today with your questions! I will help guide you.