Having a home business comes with the advantage of not having to commute or spend money on an expensive office space, but did you know that you can also deduct certain home business expenses on your income tax return? The biggest mistake people make when it comes to home-office expenses is that they fail to claim them! Don’t miss out on the savings by forgetting to deduct the following home-office expenses:
1. Write Off Your Office Space
If your home is your principal place of business, you can claim your home office as a business expense and deduct a certain percentage of the space from your income tax return. As long as your home office is regularly and exclusively used for business, you can deduct $5 per square foot of your home used for business, with a maximum write-off of $1,500 (based on a maximum of 300 square feet).
Office Square Feet ÷ Total SF of home = Percentage of Business Use
While your home office should be used regularly to qualify, this does not mean it needs to be occupied daily. Professionals such as contractors or interior decorators who spend most of their time with clients are still able to write off a home office if it is used consistently for administrative purposes (writing invoices, ordering supplies, making client calls, etc.)
2. Save on Your Home Expenses
Self-employed individuals who work from home can treat a portion of their utility costs and home maintenance as tax write-offs. For example, if your office takes up 20% of the house, you can deduct 20% of your bills for utilities, security, and general repairs and maintenance. If you own your home, you can also claim a portion of your house insurance, property taxes, home association fees and mortgage interest (this does not include mortgage payments) and if you rent your home, you can claim a portion of the rent you pay.
3. Write off Your Office Expenses
A percentage of the physical costs of running an office can also be deducted. This includes office supplies, a new work computer or phone, cleaning services, and internet fees. Even money spent on repairs or maintenance such as a fresh coat of paint or landscaping fees (if clients come to your house for meetings) is also deductible.
If you are eligible for home office deductions, the tax savings can be well worth the additional work required to qualify. For more questions about how your home can save you money, call me today at 416 903 7653 or email firstname.lastname@example.org. I would be happy to help you with your real estate needs!