According to the tax pros at Rodman & Rodman, P.C. (based in Newton, Mass.), qualified individuals may deduct a portion of their homeowner’s insurance, home repairs, and utilities equal to the percentage of space the office occupies.
“This deduction is ideal for the entrepreneur running his or her business from an office within their home. Telecommuters are also eligible for the deduction. It is not uncommon for large corporations to look for ways to reduce their employees’ long commutes. By having their employees work from a home office, they eliminate commuting and potentially increase productivity,” explained Steve Rodman, CPA, MST.
Homeowners may deduct depreciation for the portion of the home used for business, while renters deduct a portion of their rent. These deductions cannot exceed the income from the business, but excess deductions may be carried forward.
Qualifying for the home office deduction, however, is not easy. Rodman & Rodman’s tax advisors outline who may qualify for this deduction:
To qualify to claim expenses for business use of your home, you must use part of your home exclusively and regularly as your principal place of business, or exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business.
ANY personal use of the business area of the house will make you ineligible for the deduction.
If you are an employee and use a part of your home for business, you must meet the tests discussed above plus:
Your business use must be for the convenience of your employer, and
You cannot rent any part of your home to your employer and use that rented portion to perform services as an employee for that employer.
For example, if you recently had a child and are now telecommuting as your means of employment, that would NOT qualify you to deduct your home office expenses because the use of a home office is for your convenience, not your employer's.
For more information about qualifying for the home office deduction, contact Jen Reading at Rodman & Rodman, P.C.
For the IRS publication on deducting a home office visit irs.gov
Rodman & Rodman, P.C.
Founded in 1961, Rodman & Rodman, P.C. provides accounting, tax and business services to small and medium-sized companies throughout New England. With a focus on strategic planning, Rodman & Rodman goes beyond traditional accounting services and takes a proactive approach when serving clients to increase, preserve and sustain clients’ financial net worth.
From business valuations, taxation, audits, fraud detection and prevention services and succession planning to a variety of accounting IT services including software selection, implementation and training, the team at Rodman & Rodman serves as comprehensive advisors to clients. For individual clients, the company offers personal advisory services such as planning for real estate transactions, obtaining financing, estate planning and retirement planning. Rodman & Rodman Certified Public Accountants are located at 3 Newton Executive Park in Newton, Mass.