Get A Tax Break Working From Home?

Working from home is great. You don’t have to deal with any of the hassle and grind of driving to and from an office. With gas prices at $3.76 per gallon and above in my area, it’s a big money saver. And don’t forget the wear-and-tear cost on your car.

But these are the obvious financial benefits. There is another benefit to working from home. If you work from home, you may also be eligible for a tax break from Uncle Sam.

Here is how it works at a high level. It’s best if you work mainly from home. By this I mean, that you spend over 50% of the time working from a home based office. Make sure you dedicate a portion of your home to use “regularly and exclusively” as your primary space for work. You can also set it up as a “place to meet or deal with your patients, clients and customers.” For example, if you have an eBay trading assistant business, you would dedicate a work space to have your customers drop off their merchandise. In that space, you also have a setup to photograph the merchandise to post on eBay. That dedicated space is by definition your home based office.

If you meet the above criteria, then you are likely eligible to take a deduction on the part of the household expenses that are related to your work. This would be the “business percentage” portion of your expenses. To determine this business percentage, take the area of your work space and divide it by the total square footage of your home. Easy math.

A number of people that I work with are uneasy about claiming this deduction because they are afraid of being audited by the IRS. This is understandable given how complicated tax rules can be. However, this is a legitimate expense that they should claim if they are entitled to it. To help with their uneasiness, I always recommend that they seek the advice of a good CPA.

Copyright © Alex Tran