It was recently National Small Business Week. The IRS thus highlighted some tax topics relevant to small business owners.
Are you just starting out in business with operations currently run out of your garage or a recently finished basement? Maybe you have been in business for years, but use part of your home as a financial planning office or hair salon. The home office deduction is often overlooked, but can provide value.
There are two methods for claiming a home office deduction. In this post, we are just going to look at the simplified method.
How the simplified method works?
This method cuts down on paperwork. It allows you a fixed rate of $5 a square foot for areas of your home you use solely for business. The maximum allowable space is 300 feet.
A short worksheet is completed and attached to a tax return. If you are self-employed, you enter the home office deduction on a Schedule C.
Some of the deductible expenses for business use of a home include:
- Real estate taxes
- Mortgage interest
There are general limitations to the amount that is deductible regardless of the method that you use for a home office deduction. Also, consider that business storage expenses may be a deductible expense. The rules are similar to those for the home office deduction, but do not require exclusive use.
Whether you have just started a business or have been home-officing for years, it is often a good idea to get tailored tax planning advice. This ensures that not only are you complying with Massachusetts and Federal requirements, but taking advantage of available deductions.