Office In Home Deduction

Home Office Deduction


Many people avoid the home office deduction because they think it’s a red flag. But the truth is that it’s a completely legitimate deduction.


The home office deduction is more useful when you have a profit. However it can be carried forward and used in a year you are profitable. So even if you have a bad year still claim the deduction.


Some of the expenses you are able to deduct for the home office are your mortgage interest, property taxes, insurance, repairs and maintenance, utilities and deprecation.


You only deduct the percentage of your home that is used for business. Usually these spaces are office, storage for business supplies, materials storage tools storage etc….


It is important to know that when you sell your home you may have to recapture the deprecation taken or that could have been taken.


In the old days we would take the home office deduction and not take the deprecation so that when you sold your house you wouldn’t have to recapture the deprecation. However the IRS put a stop to that by changing the wording to deprecation that was allowed or allowable.


If you have been taking the home office deduction, but did not take the depreciation, the rules allow you to deduct, in the current year, all of the accumulated depreciation you failed to take over the years. This creates a very nice tax benefit in the current year.


Home office deductions can be tricky so make sure to consult with a tax accountant.

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