Work at Home, Save at Home
Five things at-home workers can do to save money come tax time.
ACCORDING TO THE U.S. Census Bureau, roughly 5.9 million people work at home throughout the country. With this becoming such a popular option–and with the end of the year fast approaching–it is a good idea to know what you can deduct on your taxes.
“People often have a difficult time determining exactly what they can and cannot deduct on their taxes when it comes to working from home,” says Tariq Shafi, a practicing certified public accountant with Shafi and Company. “But if you take the time to get it right, it can make a big difference in the amount you pay at tax time.”
While those who work from home can deduct a variety of things, here are some of the most popular deductions, according to Shafi.
1. HOME OFFICE
“You may qualify for a home office deduction if you have a space that is used exclusively and regularly for work purposes,” says Shafi. This means, if you have a dedicated home office, you can usually qualify for the deduction. If you merely have a laptop set up on a dining room table, however, you cannot.
2. HOME CARE EXPENSES
If you qualify for a home office deduction, then you may claim a portion of all home expenses. For example, if your home office amounts to 10 percent of the square footage of your total home space, you can deduct 10 percent of all your home care bills. “This includes things like utilities, mortgage interest, real estate taxes, home security, maintenance, and even lawn care,” Shafi explains. “You can even deduct depreciation because the home office is considered a structure that is used for business, just like a separate brick-and-mortar office would be.”
3. SUPPLIES
Home offices need supplies in order to operate. Shafi says these can be deducted provided you retain proof of expense. “Keep the receipts for items that you buy to keep [the business] running, as they can be deducted,” he says, “especially items like copy paper, pens, file folders, etc.”
4. INTERNET ACCESS
If you use your computer for work purposes in your home office, you can deduct your Internet access. “This is especially helpful for people who conduct their business online or use the computer for online research or even work-related e-mail,” Shafi adds.
5. SUBSCRIPTIONS AND MEMBERSHIPS
If you do any kind of research for your work-at-home career (or if you just want to keep up on the field), your magazine subscriptions and memberships to professional organizations can be tax deductible.
It is important to note that any expenses that affect only the business part of your home (such as painting or repairing the home office), you may deduct 100 percent of the bills since they are direct expenses. “You do not have to do a pro-rata share,” Shafi explains. “The IRS does put a limitation on your home office expenses. Such expenses cannot exceed the business income from the home office.”
The silver lining, Shafi says, is that despite limitations, expenses can be carried over to the following year. “If you are not sure whether you qualify for these deductions, ask an accountant before claiming them. The deductions are available, but you need to be sure you are taking the right ones, and that you’re taking advantage of all of those for which you qualify.”
STRATFORD UNIVERSITY contributed this story. Stratford University offers degree and non-degree programs in the areas of business and accounting.
