Are you thinking of opening a startup but you don’t want to rent an office space just yet? Did you know that you can use your home as an office? Not only that, but you can also get a home office deduction, provided you meet some requirements. With this deduction, you’ll pay less taxes, which is why it’s something worth looking into. Today, we’re going to explain the basics of a home office deduction and tell you how you can benefit from one.
How to Benefit from a Home Office Deduction
What Are the Requirements?
The main thing you have to keep in mind when using a home as an office is that you can’t use it for any other purposes. If you also want to use it for personal reasons, it’s no longer considered a home office. As long as that space is used strictly for business, you have already met one of the requirements.
Another important requirement is for you to be in business. This means that if you have a hobby or a similar kind of activity, you won’t qualify for a home office deduction. Still, you don’t need to have a full-time business. You can have a side business or be someone else’s employee. Perhaps an obvious requirement, you also have to make sure you actually use your home office regularly. Decorating a room as an office and then not doing business in it does not qualify for a home office deduction.
Apart from the three requirements above, which are all mandatory, you also have to meet one of the following:
- Take care of administrative work in your home office.
- Have your home office be the main place of business for you.
- Meet customers in your home office.
- Store inventory at home.
- Have a separate structure that you use as a home office.
Examples of Businesses That Qualify for a Home Office Deduction
There are multiple types of businesses that can benefit from a tax deduction. The typical one would be someone working from home and using the office on a daily basis. Still, if you’re self-employed but you don’t work at home, you can also get a home office deduction. Let’s take the example of an Uber driver. He or she can manage their finances at home, thus qualifying for this deduction.
Not to mention the fact that even if you have a separate office altogether, you can still have a home office as well. For instance, some real estate agents use part of their home for business purposes.
The Easiest Way to Get a Home Office Deduction
You can calculate your home office deduction in more than one way. However, the easiest one is to deduct $5 for each square foot you’re using as part of your home office. It’s easy because all you have to do is measure your office. If you have a home office of 150 square feet, the deduction will be of $750.
We hope today’s guide to benefiting from a home office deduction has encouraged you to apply for this home business perk.
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