Do you work from home? Are you claiming your home office on your tax return? You should be!
For years, people have believed that deducting home office expenses on your tax return makes you more likely to face a tax audit down the line. That’s not really true. You need to make sure you’re only claiming allowable expenses, but including your home office on your taxes doesn’t automatically trigger an audit.
When you work from home, both indirect and direct expenses are potentially deductible.
- Direct expenses are costs related only to the home office. So if you have to have the walls repainted or an exterior door installed for your office, those expenses are considered direct.
- Indirect expenses are costs shared by the office (business portion of the house) and the home itself (personal portion of the house). These types of expenses are often rent (or home mortgage interest), utilities, homeowner’s/renter’s insurance, etc.
A home office is defined as part of your home that is used both exclusively and regularly as a principal place of business or as a location to meet clients. If your space meets that definition of a home office, you can deduct all indirect and direct expenses. Also, if you are an employee (as opposed to a business owner), for your expenses to be deductible, you will need to prove that you use your home office for the convenience of your employer, rather than for your own convenience.
Have questions about deducting home office expenses? Pro Tax Resolution can help. Let us know how we can help ensure your taxes are prepared accurately to reduce your audit risk, home office deductions or no!