Ah, yes, it is that time of year again. The hangover has subsided. The party horns have been put away, and the college football bowl games are in full force. Oh yeah, I almost forgot to mention that it is time to start getting your receipts and tax information together. Yep, it is tax time once again, even though it seems like we just did this a couple of months ago. Since most Realtors are working out of their homes in today's market, I thought I'd give you some tips on home office deduction tips. Even though I did sleep in a Holiday Inn Express last night, I am NOT an accountant, so please consult your CPA before taking my word on these tips.
- In order for your home office deduction to be allowed, your home office must be used exclusively for business purposes and as a principal and regular place of business to meet with customers.
- The basis of your home office deduction is the percentage the total square footage of your home or apartment comprised of your home office. So, if the total square footage of your home is 2,500 square feet and your home office is 200 square feet, then your deduction would be limited to 8% (2,500 / 200 = .08) of any of the following allowable costs:
- Property taxes
- Mortgage Interest / Rent
- Homeowners or Renters Insurance
- Cleaning Expenses
- General Household Repairs
- Depreciation of all home office and major capital improvements – new HVAC, water heater, roof, etc.
- Telephone / Fax line, if you don't have a dedicated business line.
*Note that any capital improvements that are exclusive to your home office can be 100% deducted.
If you are honest on your return and keep good documentation, the use the home office deduction to help lower your 2011 tax burden and keep more of your hard earned cash in your pocket.