MerchantCircle Forums > Tax Tips for Small Businesses

Hi Julie,

Your question makes a valid point. Why worry about a home office deduction if I can already deduct some home expenses on a Sch A? However, the Home office deduction is a great tax write-off as long as it is a valid write-off. The key word in this question is "some". You can only write-off some expenses such as mortgage interest and property taxes from your home for individuals not claiming a home office. However, when claiming a home office, you can claim these whole amounts as well as writing off a business portion of your homeowners insurance, utilities, depreciation from the business use of your home, and any repairs or maintaenance. Again these deductions are subject to whatever makes up your business use of your home. For day care providers, this is calculated differently than for those using a spare bedroom for an office. Also please remember that to qualify, it must be used regularly and exclusively. The best thing about this is that this write off then goes against any income (not to exceed Sch C income) from your business and thus reduces your paying more in Self-Employment tax. That has got to be good! For some plain english explanation on this topic, follow this link: http://www.tothepenny.biz/rep-homeoffice.php Hope this helps!

Doesn't  the down side of deducting your home office come at sale time when the deductions taken for the time used as an office effect the ability to disregard taxes on the capital gains as you could if you were to role the equity into another property? In other words, you can't have it both ways: you take the benefit of the deduction while you live in the house and pay something on the gain when you sell or you get the full benefit of rolling all the equity gain into another property with no tax liability. Anyone else know anyting about this?

Hi Julie,

Your question makes a valid point. Why worry about a home office deduction if I can already deduct some home expenses on a Sch A? However, the Home office deduction is a great tax write-off as long as it is a valid write-off. The key word in this question is "some". You can only write-off some expenses such as mortgage interest and property taxes from your home for individuals not claiming a home office. However, when claiming a home office, you can claim these whole amounts as well as writing off a business portion of your homeowners insurance, utilities, depreciation from the business use of your home, and any repairs or maintaenance. Again these deductions are subject to whatever makes up your business use of your home. For day care providers, this is calculated differently than for those using a spare bedroom for an office. Also please remember that to qualify, it must be used regularly and exclusively. The best thing about this is that this write off then goes against any income (not to exceed Sch C income) from your business and thus reduces your paying more in Self-Employment tax. That has got to be good! For some plain english explanation on this topic, follow this link: http://www.tothepenny.biz/rep-homeoffice.php Hope this helps!