If you’re one of the 43% of Americans who regularly skip the commute and simply walk down the hallway to get to work, you may be able to take advantage of a new, simpler home office deduction on your 2017 tax return. Entrepreneurs and home-based workers can claim a deduction each year for their workspace, plus a percentage of their utilities and even mortgage payments.
Taxpayers still have the option of using the original Form 8829 to calculate their home office deduction, but the IRS estimates that using the new option will save small businesses more than one million hours each year in record-keeping and paperwork. It is suggested that home-based business owners first assess whether the $5 per square foot calculation will be more or less than the $1,500 limit. If it’s below the limit and they don’t have significant depreciation expenses, it may make a lot of sense to use the new simple form. If the amount is well over $1,500, then going through the old Form 8829 will be your best option.
The first step in deciding how to maximize the home office deduction is making sure your space meets IRS criteria. IRS rules state that the office space must be used regularly and exclusively for business purposes. If you work at your kitchen table with merely a laptop, that's a no-go. Then you must calculate whether the new simplified deduction makes the best financial sense for your situation or if itemizing deductions on Form 8829 is the way to go.
Being a small business owner has many advantages, one of which may be the ability to work from home. The home office deduction is an additional perk for those who are fortunate enough to skip the commute and can help virtual business owners re-coup some of the everyday expenses they incur.
Not sure if you're eligible for the home office deduction? Call the Bean Counters Bookkeeping. We're a virtual bookkeeping business; so that you can focus on what is important, your business. www.thebeancountersbookkeeping.com