IRS Tax Filings: Deduct Home Office Costs

The end of one year or the beginning of the next is a great time to collect tax information for your home office deductions.

If you work from a home office part or all of the time, you realize how important it is to keep good records for filing income tax each year. Even when income isn't that great, you need to submit records that indicate your investments for home office needs. These cover a wide range of expenses, so check with a tax accountant before filing your taxes. But here are a few things to start tracking. Have this information ready when you meet with your accountant or a tax lawyer.

1. Home office space and utilities. Find out what portion of your living space can be claimed as a home office. It may depend on how much work you do at home, say 20% of your office duties or one day per week. Or it might be calculated by the amount of floor space that is used for business concerns, such as the desk area, equipment and storage, or receiving clients to conduct business. You also may be able to deduct a percentage of your home utility costs, including electric, gas, or water, depending on how these are used or contribute to your home office set-up.

2. Work-related supplies. Purchasing paper, pens, envelopes, postage, ink cartridges, light bulbs, disks, computer memory, and other items that help you work at home may become part of your tax filing under specific conditions. Keep track of what you buy, when, how long it lasts, and what it is used for, since things shared with personal usage needs may only be partially deductible. Start a file for receipts and add notes for clarification. Copies of cancelled checks or credit card statements may be useful as well.

3. Local or long-distance services. Online hookup, a telephone line, fax and copier services, post office box, and an email account or Web page hosting all may be partially or wholly deductible if used for company related work that you perform at home. You will have to distinguish through careful documentation which portion of these services, if any, are used for personal interests. Keep mileage receipts for business travel if you can deduct this, too.

4. Equipment and furniture. Buying a desk, chair, computer, telephone or cell phone, printer, file cabinet, and other types of office furniture that will be used in your home office may offer tax advantages. Check a print tax guide or go online to find out more about the types of purchases you have made to furnish your home work space. Again, keep receipts from the time of purchase, as well as extended warranties, maintenance, and repair that may have been performed during the year.

5. Losses or replacements. When a computer stops working and is out of warranty, you may need to buy a new one costing hundreds of dollars. This may be a deductible expense that you can use at tax time. Upgrading equipment, replacing broken or stolen items, and repairing things that don't work as well as they should all may come under the umbrella of tax deductions.

With each passing year you will gain more understanding about the tax aspects of a home business. In the meantime, check with tax experts in your area or online for accurate feedback on possible deductions.

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