Wednesday's tax tip Vol. 8 - Home office Deduction

Many client's have always had the impression that home office deduction is a red flag to an audit.

My typical response is "if it's a legitimate deduction and we can document it, we should take it".

The general rules on home offices are 1) it must be your principal place of business and 2) the space must be exclusively used for the business purpose.

Once you have met the test requirements then it becomes a matter of calculating the total expenses related to the house. Interest, real estate taxes, insurance, PMI, utilities, water, trash removal, home owner association dues, depreciation on the business portion of the home, repairs, etc.

Establishing a home office could have other implications by not claiming it. For instance, if you do not have a home office are your commutes to clients deductible?

So go through the exercise and see what the tax implications of the home office deduction is worth to you.