Barbara Weltman on Home Offices

Are you nervous to claim a home office deduction? Business expert Barbara Weltman discusses what does (and does not) qualify as a home office.

Video Transcript

Believe it or not, today 52% of all businesses operate from home. So whether you’re running your business from a spare bedroom, a corner of the family room, a garage, or some other space in your home, you may be eligible for a home office deduction, which allows you to treat some of your personal expenses as a business write off. There are two ways to figure your home office deduction. You can take your actual expenses, which is the allocable portion of the personal expenses that relate to the business space that you use, or you can rely on an IRS set standard rate, which is five dollars per square foot up to 300 square feet of space. That eliminates the time and energy it takes to track all of the personal expenses that you have for your home. Whichever method you use, you have to qualify [makes sound] as a, for a home office deduction. Which means that your home must be your principal place of business, or a place to meet or deal with customers and clients in the normal course of your business, or a separate structure. So for example, let’s say you have an office downtown, and you live in the suburbs and take some of your work home at night, because you don’t want to stay downtown late into the night. That’s not gonna qualify as a home office, because that’s not your principal place of business. Once you pass the first hurdle, you also have to use the space regularly and exclusively for business, which means the kitchen table is never going to qualify as a home office. One of the big myths, the, is if I claim a home office deduction, is this an IRS red flag? Is this gonna get me into trouble? Well, there are no statistics on this. The IRS has never said that it is or isn’t an audit red flag. But from my perspective, I don’t really think it is, especially not anymore. Given the number of people who legitimately work only from home, and also given the fact that now the IRS has even created this simplified home office deduction method.

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