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Updated for 2012
The home office deduction is figured on Form 8829 (instructions). The deduction is entered on Schedule C, Line 30 where it is subtracted from so-called Tentative profit, which appears on Line 29. The final result is Net profit (Line 31).
Whether you're a renter or homeowner, you may qualify for the home office deduction.
The home office deduction allows you to deduct certain direct and indirect expenses associated with your home if you work out of your home.
Direct expenses are expenses directly related to the actual space used for your home office. For example, the cost to paint your home office.
Deduct 100% of direct expenses.
Indirect expenses are personal expenses associated with the entire residence. For example electricity. insurance, water, and the cost of a burglar alarm monitoring service.
Indirect expenses must be allocated to your home office on some rational basis, for example, square feet.
If your home office represents 10% of the square feet of your entire residence (200 s.f divided by 2,000 s.f.), you may deduct 10% of the total cost of indirect costs (e.g., electricity. water, alarm system monitoring service).
Form 8829, Expenses for Business Use of Your Home:
Schedule C, Profit or Loss From Business:
Caution: The home office deduction may not be used to increase a net business loss.
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