Having a designated space at home to dedicate to your business is essential to separate your work and home life as a business owner. But, who pays for your home office? How do you set it up? What are the financial perks of having an office in your home?
Technically, no matter how you work it, you’re going to end up paying for and investing in your home office. But, what’s the best way for you to pay for your home office? It’s paying in a way that allows you to track and deduct your expenses.
And, of course, that requires you to track your expenses, calculate the square footage of your home, and keep up with your home maintenance fees – but, it’s the best way to get the most out of your home space. Plus, we have an easy-to-use tool that will help you with the final calculation of your home office deductions.
The best way to pay for your home office is by tracking every purchase you make, tracking your home maintenance and general expenses, and deducting the expenses at tax time. While your accountant and local tax preparer can help you sort through your expenses, you can get an estimate by using a tax deduction calculator.
Here are some of the expenses you should track that are tax deductible when building your home office:
General home expenses and home maintenance are considered tax deductible in relation to your home office, at least, by a percentage of your square footage. The square footage is determined by the size of your office space, a space defined by the IRS as a portion of the home exclusively for conducting business on a regular basis.
Once you’ve established the approximate square footage of your home office, you can deduct a percentage of these home office expenses (indirect expenses) from your taxes:
Your home is not the only thing that is tax deductible when it comes to your home office. Expenses related to furnishing your office, purchasing your computer and tech, along with a few miscellaneous expenses are considered direct expenses that are also tax deductible.
Here are just a few of the many home office expenses that are tax deductible to use as examples:
Direct expenses will vary depending on your business needs and the size of your home office. Some expenses may be deductible via depreciation vs. purchasing and should be navigated through a professional tax preparer or an experienced accountant.
If you’re a business owner who conducts your business primarily through your home, you qualify. But, that’s not limited to traditional small business settings. Other businesses can set up and take advantage of home office deductions like content creators, freelancers, and photographers.
And, once you’ve set up your home office space, you can utilize other tax deductions and home business owner perks such as the Augusta Rule. You can find other similar rulings by researching tax rules related to your business type and local area.
While you’re navigating through your expenses and working to make the most out of building your office space within your home, reach out to a ModVentures consultant to get advice and direction based on your specific needs.