When you work from a home office, you incur a number of costs to keep your business going. The good news is that many of these home office costs are tax-deductible. Even if you don’t run a home business, but you telecommute, it’s possible to deduct a number of your home office costs on your taxes.
What Can You Deduct With Your Home Office?
First of all, you need to realize that you can’t just deduct anything that resembles office supplies. In order to deduct home office items on your taxes, they need to be used solely for business. Additionally, they have to be costs that you aren’t reimbursed for elsewhere. So, if you telecommute and your employer gives you a stipend to cover some of your home office costs, you can’t deduct them.
If you pass the smell test, though, here are 5 home office items that you can deduct:
1. Supplies
If you buy home office supplies, such as paperclips, document organizers, pens, and paper, you can deduct them. Your office supplies help you run your business more smoothly or accomplish necessary tasks for your telecommuting job.
2. Equipment
Not only can you deduct home office supplies, but you can also deduct equipment. If you buy a printer and computer for your home office, you can deduct those costs. Your chair and your desk are also tax-deductible — as long as they are only used for business. Telephone headsets and other items can also be deducted.
3. Internet Use
You can deduct a portion of your home’s Internet costs as part of your business. If you use the Internet to conduct business, you can deduct that. About 85% of the Internet use in my home is for my home business, so I can deduct up to 85% of my bill on my taxes. Figure out how much of your online use is related to your business activities, whether it’s as low as 20% or as high as 90%, and deduct that from your taxes.
4. Trade Publications
If you receive trade publications that keep you informed about developments in your industry, you can deduct their cost. When you use these resources to improve your business, it counts as an expense. This includes online subscriptions and important software as well.
5. Telephone Use
If you make business calls from your home phone, you can deduct the cost. Make sure that you keep track of which calls are business-related, and add up the costs. You can deduct calls made with Skype, too. This can save you money on international business calls, and provide you with easy-to-read records related to your phone use. Realize that regular charges, such as taxes and fees, aren’t tax-deductible — unless you get a dedicated business line installed for your home office.
This goes for cell phone use as well.
Documentation Is Needed for Your Home Office
Make sure you document all of your expenses. Save receipts, and circle applicable charges on bills. You want to make sure that you can back up all of your deductions in the event of an audit.