Q. I have a small home office, I have not been deducting its expenses as I am worried about attracting the attention of IRS auditors. What should I do?
A. It's very typical for many people with a side job to use a portion of their homes as the office for the side businesses. However, most of such people opt to forgo the home office tax deduction, partly because no records of paperwork were kept and partly because of the red flags it may raise to IRS auditors.
A Simplified Home Office Write-off
Starting from 2014, IRS allows a simplified version of the write-off that your side business deserves - you can deduct $5 per square foot of the office space up to $1.500 with no documentation required.
Unlike the old method of calculation, no depreciation is taken on your home, which means when you sell the house, you don't have to worry about the complicated recaptured depreciation and recalculated capital gains.
If you use online tax filing software, when you set up your business reporting, you must report that you have a home office first, then it will guide you through the options.
A. It's very typical for many people with a side job to use a portion of their homes as the office for the side businesses. However, most of such people opt to forgo the home office tax deduction, partly because no records of paperwork were kept and partly because of the red flags it may raise to IRS auditors.
A Simplified Home Office Write-off
Starting from 2014, IRS allows a simplified version of the write-off that your side business deserves - you can deduct $5 per square foot of the office space up to $1.500 with no documentation required.
Unlike the old method of calculation, no depreciation is taken on your home, which means when you sell the house, you don't have to worry about the complicated recaptured depreciation and recalculated capital gains.
If you use online tax filing software, when you set up your business reporting, you must report that you have a home office first, then it will guide you through the options.
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