Things to know about Home Office Tax Deduction

When you use a portion of your house for commercial use, you may be entitled to deduct costs for “entrepreneurial use of your property,” as defined by the IRS. Many of the costs of operating your property, such as electricity, lease, security, devaluation, loan interest, property taxes, and some calamity losses, renovations, and upgrades, should be deductible provided you fulfill the technical criteria of the tax code. Seeking help from tax law firm Virginia Beach is the best way to make the most of the home office tax deduction. 

In this blog, we have explained home office tax deductions in detail.

Tenants and homeowners can both take advantage of the home office tax exemption. It may be used for office space as well as other business-related rooms in your house. Your “residence” can be a house, condominium, or studio unit—or even a camper van or watercraft, according to the IRS—provided you can dine and live there.

To be eligible for the home office tax exemption benefit, you must fulfill two tax code criteria:

Requirement #1: First and foremost, you must utilize it on a daily and exclusive basis. You must utilize a portion of your house entirely for trade or company regularly.

Requirement #2: You must also be capable of demonstrating that your house is your primary business location. You must also be able to demonstrate at minimum one of the following:

  • At home, you receive patients, clients, or consumers.
  • You have a separate facility on your land dedicated solely to your business.

Even if you don’t make the cut for the home office tax exemption benefits, you can claim ordinary business operational expenses. Suppose you don’t match the requirements mentioned. In that case, you can still subtract usual and essential business costs incurred at home, such as overseas calls, an independent business phone system, and the expenditure of office equipment and supplies. Only the expenditures of actually operating and managing your house, such as electricity, rent, amortization, homeowners insurance, loan interest, property taxes, and repairs, are subject to the above IRS requirements. Before applying for the business tax deduction, it’s best to consult lawyers dealing with sales tax Virginia Beach.

Regular and Exclusive Use

To exclude home-related costs, you should utilize a portion of your house entirely for your business or company regularly.

Regular use: The IRS doesn’t give specific criteria for regular use; all it says is that you should utilize a portion of your house for business regularly, not simply for infrequent or ancillary purposes. 

Exclusive use:  The term “exclusive usage” refers to the use of a piece of your house only for commercial purposes. You don’t fulfill the exclusive use criteria if you utilize space in your house for both professional and personal functions. 

The rule of exclusive use has two exceptions. If you utilize part of your house to keep inventory or promotional material or manage a certified daycare center from your property, you don’t have to fulfill the exclusive use requirement.