Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
That’s what I keep hearing from people as they’re filing taxes. “Oh no, I don’t want to risk an audit. Not on my return—no office-in-home deduction for me.”
Don’t be silly. Practically everyone is working from home these days. Thanks to special new security precautions and filing systems, even IRS staff can work from home.
Home office rules for both employees and business owners
In order to be considered a home office, a space must be your primary place of work—where you meet with clients, patients, or customers; where you do all your paperwork, make all your calls to schedule appointments, and keep all your business records; or where you store all of your inventory. You must have a specific, separate area where you work.
This means that using the dining room during the day and then using that area for the family meal at night doesn’t count. Instead, you must establish a permanent room or part of a room or garage for your desk, equipment, or inventory.
Home-office expenses are always limited to employees’ W-2 income or business owners’ profits. Tax-deductible expenses include the business percentage of:
Naturally, all expenses directly related to the business space are fully deductible, including business insurance.
In addition, homeowners must depreciate the business part of the home. It does complicate things now and when you sell the house, but that’s another story.
Starting with employees
To claim office-in-home deductions, the employee must be using the home for the employer’s convenience. Get this in writing!
Sometimes, this is obvious—for example, a company is located in Ohio and the employee’s sales territory or customer base is in New Mexico and Texas. Or a company might be in the same town but might lack the office space for the employee to be on site.
It’s important that employees doing similar jobs receive the same treatment. If not, it could be asked why one employee is working at home while others work in the office. Define the reason, in writing. For instance, you might note that you work at night and it’s too costly for your employer to provide nighttime security at the office.
Employees report office-in-home costs on line 4 of Form 2106. To compute the expenses, there’s a worksheet in IRS Publication 587.
Many people are running their businesses from home. It’s cheaper and more convenient—and definitely a green alternative.
Although losses are limited to business profits, business owners can apply the unused losses on future years’ tax returns. These losses reduce your future self-employment taxes, as well as income taxes.
Report your home office expenses on Form 8829. Note that there is a special area for daycare businesses to compute the business space based on hours used, rather than the exclusive business use of the space. The bottom of the form has the depreciation computation. That’s also where you’ll find the line for the unused depreciation to carry over to the next year.
Real red flags when filing taxes
Seemingly duplicate expenses on Schedule C will attract attention. Report all utilities on Form 8829; don’t take them as line items on Schedule C. When renting storage space, don’t put it on the rent line on Schedule C—put it on one of the blank lines on page two instead. Having both rent and a Form 8829 is a red flag.
Since you’re not paying office rent, use the money you save to pay down your mortgage. This trick has helped many people be mortgage-free today.
Money Management Tips: Storing Your Paperwork
Last-Minute Ideas for Saving Money on Your Taxes
Documenting Your Donations for Tax Deductions
Tax Deduction for Claiming Elderly Relatives and Dependents
Tax Tips: Tax Implications of a New Baby
Paying Taxes on Self-Employed or Side Income
Eva Rosenberg, EA is the publisher of TaxMama.com , where your tax questions are answered. Eva is the author of several books and ebooks, including the new edition of Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.