Working from home is a major privilege that so many of us get to indulge in. But are you capitalizing on the deductions that you are entitled to with this privilege?
The IRS provides rules for home office deductions that if you abide by you can increase your take home pay.
How do you qualify for these deductions if you work from home?
Great question! Here are two ways you may qualify! Yes, there are tons of ways available, but you will actually get more results when you take things in bite sizes where you can have some measurable results. So here we go!
1. Principle Location: I was just talking to a friend about this and she wanted to know if this was necessary. And the answer is absolutely! When it comes to the IRS, you need evidence that’s more than just your word in thin air. The more documentation you have the better you are able to justify your stance as well as having documentation helps to jog your memory when needed.
So yes you need to prove that you use your home as the principle location for your business. That means even though you may conduct business outside of the home, most of what you do is done in this designated space.
Generally speaking, home office deductions are calculated off a certain percentage of your residential space for business affairs. If you use a spare bedroom in particular in your work, then you need to figure out how much space that is in relation to your overall home is designated to your business!
2. Regular and Exclusive Use. This is very simple and clear cut, at least I think so. You are required to use a part of your residence as designated business space only. So that means if you use your basement as yoga space then that’s all you use that part of your basement for. Try not to make things complicated as you may be creative in your business but sometimes the rules from the IRS like this one is very black and white.
Be sure to take these rules seriously as the IRS are vigilant about small business owners who bypass these rules yet still take the home office deduction. Don’t get caught in that trap, you have way too many lives to impact and improve to get cause in that spiral.
To your success!