Tax Deduction?

[tomhank17]

Is there any way that a person can reduce taxes if a person uses its home as the office place. If a person works from home will he/she enjoys any kind of tax benefit?

[jeffrey]

Yes, significant. The office space needs to be used exclusively for the home business. All direct costs are deductible (furniture, desk, computer, Internet, etc) plus a percentage (whatever percentage of space the office takes up in the house) of all indirect costs (mortgage, house repairs, utilities, etc)

http://www.savingadvice.com/forums/taxes/41-reduce-taxes-home-business.html

[noppenbd]

Is there any way that a person can reduce taxes if a person uses its home as the office place. If a person works from home will he/she enjoys any kind of tax benefit?

One big caveat is that if you are not self-employed (i.e. an employee who works from home) these deductions must exceed 2% of your AGI before you actually get any reduction in taxes. For example, say your AGI is $100K, and you have $2500 in home office expenses for the year. The deduction you will receive is reduced by 2% of AGI ($2000), so you will only be able to deduct $500 in expenses ($2500-$2000). If you are in the 25% tax bracket you will end up increasing your refund by $125. This is all assuming you have enough tax deductions to itemize. If you do not itemize the home office deduction will not help you at all.

If you are self-employed you do not have to exceed the 2% limit.

[moneybags]

FYI - a home office is a big red flag for the IRS, so make sure you follow their guidelines & meet the requirements.

[Daylily]

We do it because DH is self-employed. We play by the rules.

I wouldn't say that it is SIGNIFICANT as Jeffrey states above, but, yes it does provide us with some extra deductions.

[maat55]

I'm self employed and use my house for an office, but I never deduct it. Not worth the risk of a IRS agent having a bad hair day.

[franklin001]

Is there any way that a person can reduce taxes if a person uses its home as the office place. If a person works from home will he/she enjoys any kind of tax benefit?

Homeowners can claim a slew of write-offs to lower their tax bills -- as long as they itemize. There are deductions for mortgage interest, mortgage points and real-estate tax payments.

[sweeps]

[P]arts of the office in home deduction may be subject to recapture down the road. The depreciation taken on the residence over time may be recapturable. This could increase your potential capital gains on the property upon sale. Also, certain types of office in home deductions for free-standing buildings may reduce the amount of capital gains exclusion you can take on a residence sale. For decision-making purposes, this means you are comparing the dollar amount of tax savings by taking the office in home against possible tax 'give-backs' upon the sale of the property. So, the effective tax bracket you are in while taking the current office in home deduction compared with what it will be when you sell becomes an important issue.

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