Home Office Expense
What is a Home Office Expense?
Home office expenses are employment or business ownership related expenses that are accrued while a person performs tasks related to her employment or business while in her home. These expenses can be deducted from an individual’s income tax if she spends at least fifty-percent of his employment time in his home.
What can an individual deduct as home office expenses?
Individuals can fully deduct items such as the following:
- Office supplies, such as paper products
- Computers and computer equipment
- One additional phone line (the residence’s primary phone line cannot be deducted)
Individuals may also take partial deductions based on certain home ownership expenses, such as property taxes, utilities and mortgage interest. This aspect of the deduction is capped depending on the income of the business.
How do you calculate Home Office Expense?
An individual’s home office expense is calculated using tax form 8829. First, one must calculate the percentage of their house that is dedicated as an office. This can be done by either measuring the
square footage of the office and dividing this number by the overall square footage of the home or, less accurately, by simply estimating what percentage of the home is dedicated to the office. One can then deduct this portion of her total home utilities, home owner’s insurance, and other expenses. Furthermore, any repairs made specifically to the home office are 100% deductible.