You can deduct your Home Office as an expense?

Having a desk in the living room and call your office does not qualify as a legitimate home office. Find out what you qualify so you can make the most of your expenses.

The number one rule to qualify as a home office is that it must be a separate room, used only as your office. Your children can not go and do homework or any other activity. And 'your office - plain and simple.

Now for tax purposes you must know the total square footage of your house or apartment. (Yes, renters can deduct their office too long as it is a separate room). Now measure the length and width of your office, multiply them to get the square footage of your office. Keep a record of this in your "Year End" file. This file is for all the documents you'll need to take to your accountant in the tax period.

If you rent the house or apartment, you will be able to deduct part of your rent and utilities. If you want to deduct phone charges, you must have a separate business line you put in your office. List the monthly phone bill, and installation costs under the "Phone" on your spreadsheet expenses.

The amount you can deduct for rent and utilities is the same percentage as the size of your office is the size of your house or apartment. We say that the apartment is 1,000 square feet and your office is 10 ft x 10 ft or 100 square feet. This means that your office takes 10% of your total living space.

At the end of the year, you will be able to deduct 10% of your rent and utility expenses on your taxes.

Keep a copy of your bills each month. On each statement, find out which part of the bill that belongs to the business. Note that amount in the account and note it on your spreadsheet utilities. Let's say your electric bill was $ 85.00. Note that $ 8.50 of this law is a business expense. Pay your bill in full with your personal account. And that's all for your monthly expenses.

If you own your home and you have a room built for your office, you must keep records of such expenses. Let's say you have a basement and you had added walls to create a separate office. Keep all receipts (materials and labor) in a separate folder, as part of your "Year End" record. These costs are deducted for a period of time (usually 3-6 years). These are not recorded on your worksheet monthly.

So there you have the basics - the size of the office determines the amount of eligible expenses for taxes, have a separate phone line and save all receipts.