Many Arizona small business owners such as realtors, business consultants and contractors work from their homes, but not all home offices qualify for tax deductions. This is a common concern, our CPA offices hears from business owners so we wanted to explain in more detail.
IRS regulations detail two requirements that must be met in order for the business tax deduction to be allowed:
- Regular and Exclusive. Part of your home must be used regularly for conducting business, and that part of your home must be used exclusively for conducting business; and
- Principal Place of Business. Your home must either be the only place where business is conducted or, if you also have another place of business, your home must be a place where a substantial portion of your business is conducted. While this does not need to be a separate room, it does need boundaries; you could likely not claim the deduction if your kitchen table doubles as your desk.
Home Based Business Tax Advice
If you believe you qualify for the deduction, a tax professional such as ones found at Sean Core CPA can help you with next steps.
Two different methods that can be used to claim the deduction.
- The “standard” option involves calculating and documenting the specific expenses associated with the home. The deduction would then be based on the square footage of the room, or of the space, dedicated to business use.
- Beginning with tax filings for 2013 and later, taxpayers now have a “simplified” option which, instead of tallying and documenting actual expenses, allows the taxpayer to simply multiply a prescribed rate by the square footage of the home used for business purposes.
There are special rules for home daycare providers, so if your business is providing childcare from your home, contact your accountant or specially trained CPA to discuss those requirements.You can also read the full requirements as published in IRS publication 587.
If you are looking for tax advice or know that you could do better at maximizing your home office deductions , or want help with your business taxes, please contact our Mesa tax & accounting office for a phone appointment!