Business Deductions
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- Home Office Deduction
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- Qualified Plan Awards
- Schedule C Expenses
- Section 197 Intangibles
- Should You Sell or Trade in Your Car?
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Need Some Deductions for 2012?
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Updated for 2012
What is the Home Office Deduction?
The home office deduction can save you taxes because it is used to reduce net business income reported on Schedule C (instructions).
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
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
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).
How to Claim the Home Office Deduction
Form 8829, Expenses for Business Use of Your Home:
- The home office deduction is figured on Form8829.
Schedule C, Profit or Loss From Business:
- The home office deduction is entered on Schedule C, line 30 (2011).
- Line 30 is subtracted from line 29.
- Line 29 is labeled: Tentative profit (loss).
- The result is entered on line 31.
- Line 31 of Schedule C is labeled: Net profit (loss) which takes into account the home office deduction.
Caution: The home office deduction may not be used to increase a net business loss.
Next:
Home Office Deduction: How the Home Office Deduction Works; Ordinary and Necessary Business Expenses
Related Links
- Qualifying for the Home Office Deduction
- Principal Place of Business Test
- Administrative and Management Rule
- Historical Note-Home Office Administrative Rule
- Using Outside Services
- Employees With a Sideline Business
- Deducting Storage Space for Business Products
- Setting Up Your Home Office
- Separate Business Structure
- Steps for Computing the Home Office Deduction
- The Home Office Deduction Computation
- Direct Expenses
- Indirect Expenses
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