Working from home is a true blessing. In the beginning, you may find it difficult to adjust a work from home routine because you have spent so many years in the corporate world. The time when I started working from home, it was a difficult time for me because all those financial securities that I had previously were lost and I used to miss my colleagues as well. However, soon the sense of freedom and independence prevailed and I became fearless about my home business. One of the biggest advantages of working from home is that, you don’t have to pay a lot of taxes. You can dress the way you want, you can work on flexible hours, you can take care of your family, you can take a day off whenever you want and much more. You can easily qualify for extra tax breaks by working from. The most important thing is to take advantage of those tax breaks. In this post, I will be describing how you can take advantage of tax breaks that you have availed by working from home.
The first thing that you need to do is to become confident. You should be confident enough to explain why you should get tax breaks. As you are using a portion of your house as a business, you will be allowed to deduct a “pro-rata” share of expenses like mortgage payments or house rent. You can also get exclusion from security system tax, real estate taxes, heat, water, home insurance premiums, air conditioning, electricity and depreciation. If your home office is covering 25% of your house space, you can get a tax exemption of up to 25% easily.
The problem is, as soon these expenses and taxes will be deducted, a red signal will be sent to IRS. You should not get scared in such situation as well. As I said before, you just need to be able to justify. Many people working from home are eligible of tax exemption but since they don’t have solid arguments to justify, they end up paying extra taxes. You can fill the IRS Form 8829 along with your tax returns to tell IRS how you are using your home office and why you need it.
One thing that you should keep in mind is that, the amount that you deduct from your tax cannot be more than the net income of your home business. If your business had a net profit of around $4,000, you can deduct $4,000 from your taxes. If you find it difficult to calculate all these tax information and deductions, you can hire an accountant who can do this job for you.
By using your home office exclusively for business and not for any other purpose, you can easily get more deduction on your tax. Keep in mind that you need to have a separate room for your home office because if you work at your kitchen table, IRS won’t declare it your office and give you deduction in tax. The home office should look like an office and not a dorm room.
You should have a separate phone line, door and internet connection for your office because these are the kind of things that are noticed by IRS.