Ask an Accountant: Home Office Space

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Thanks to Mom on Dealz for sharing her new series, Ask an Accountant!  Sharon is married to an experienced accountant, so if you’re looking for a professional to help out with taxes this year, give him a call.

Question:
How do I determine the amount of office space to use for a write off?

Answer:

A home office is defined by IRS guidelines as “any area of your home used exclusively for business”. This means, it cannot serve any other purpose other than business use. If an area of you home qualifies, the easiest way to determine the area is to estimate the suare footage of the business area of the home as a percentage of the entire square footage of the home.

This is reported on Form 8829, then you are able to apply that percentage to mortgage interest, real estate taxes, hazard insurance, repairs, and utilities and get a better deduction than you would normally get from those items on schedule A. The remaining percentage of the mortgage interest & real estate tax then goes on the appropriate line on Schedule A.

Here is an example
: Your home is 1,000 sqaure feet and your home office is 100 square feet. Therefore your business percentage is 10%. You would then apply the 10% to your mortgage interest, real estate taxes, hazard insurance, repairs, and utilities. Your remaining percentage of mortgage interest and real estate tax would be 90% and would go on your scedule A.

*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation
.

photo credit: austinpost.org

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