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So Exactly What Counts As a Home Office?

January 27, 2012 | Comments: 0 | Views: 139

In this article we would like to take a look at a deduction that is confusing but valuable to tax payers. We will be talking about what can be considered a home office.

A home office is a room or area used exclusively for business. So it can be a room that you keep a computer in and work on your bookkeeping; it can be a room that you store inventory or equipment and tools; or it can be a room where you actually create or manufacture a product. It can include a shed or shop in your backyard, an unfinished basement that you keep products in, or a part of the garage that you keep tools and work vehicle in. Ordinarily the room or space must only be used for business. Now, like everything in the tax code, there is an exception. If you have an office or shop somewhere other than your home, your home office must be a room used exclusively for business purposes. But, if your home is your only place of business you can use a portion of a room. You could even use your closet, if that is where you work! To really help you understand what options you have, here are three examples of a legitimate home office space:

Example #1:Natalie recently went through a divorce. She has three small children, two of which are not in school yet. She wanted to stay home with her children, so she started a daycare business. She tends her own children along with four others from 6:30 am to 7:00 pm every weekday. In her case a portion of her entire home is deductible. We will explain more about how to take a portion of an entire house as a home office shortly.

Example #2:Alan was laid off from his job of 15 years, so he decided to start a business selling cleaning products. He operates his business primarily over the internet. He owns a small home and has a wife and 2 children. There isn't an extra room to work out of so he uses a corner of the living room. Because this is his only place of business the area in his living room is considered a home office.

Example #3:Bobbie has a business of sewing costumes that she sells on eBay. Her family is grown and gone out of the house so she turned her basement into a great big sewing room. She had a large family room that she turned into a product manufacturing room by tiling the floor, so it would be easier to keep the fabric scraps and thread under control, and putting her cutting table and sewing machines in it. She turned a spare bedroom into a storage room full of shelves to keep bolts of fabric and sewing supplies on. She also has a corner that she uses to package the costumes for shipping. Even though she sells them over the internet, she manufactures the costumes in the basement. This family room and bedroom in her home is definitely considered a home office.

We hope this helps you know whether or not your home office can be deducted this tax year.

If you have any questions, check out to learn more about this valuable deduction!

Source: EzineArticles
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