Where can I find good resources for figuring out home-office tax deductions?

October 25, 2006 10:41 AM

Where can I find good resources for figuring out home-office tax deductions?

I work at home full-time, using one bedroom of our 2-bedroom apartment as my office. It's not a dual-use room, though there is a closet in the room that holds (non-work) clothes. My business card lists another address as our business address (so I'm not giving out my home addy to clients), and I don't keep a detailed log of my activity, though my emails can easily be traced to my home computer.

I'm generally aware of the issues, but I'm looking for something more straightforward than diving right into a Form 8829. I do my taxes online myself, and I'm fairly competent at it, so I'd like to avoid "go to an accountant" answers for this one issue.

Are there resources online for figuring out how much of my rent/utilities is deductible, and what documentation I need to provide to back this up? The articles I've found online talk broadly about the subject, but I'm looking for some more specific details. I live in NYC.

posted by mkultra to work & money (5 comments total)

I should note that I am a salaried employee of a company of which I'm not the sole proprietor.
posted by mkultra at 10:43 AM on October 25, 2006

Look at the IRS page for Home Office Deduction, and also read IRS Publication 287, "Business Use of Your Home."

During one of my many audits, an IRS agent told me that a home office deduction is one of the things that can cause your return to be flagged "for further examination." So you're wise to be concerned about documentation.

On this page you'll find a form for calculating your deduction. (Requires Java.)
posted by wryly at 11:57 AM on October 25, 2006

I had a bunch of data, but the page linked by wryly has much better documentaion than what I remember off the top of my head.

For what it's worth, I discovered that the potential for audit was higher than the value I would receive from home deduction, and fully 1/3 of my house has my company stuff all over it.
posted by dejah420 at 1:28 PM on October 25, 2006

The general advice is not to do this. The benefit is judged not to outweigh the risk of audit, whether you're eventually found in noncompliance or not.
posted by ikkyu2 at 5:19 PM on October 25, 2006

The general advice is not to do this.

I disagree. You would be foolish not to take a deduction to which you are entitled. Your chances of being audited are miniscule and even if you are, there is no problem as long as your deductions are legitimate.

If you want to do your own taxes, one of the easiest ways to handle this is to use a tax preparation program such as Turbotax Home and Business for about $90 (which is partially deductible as a business expense by the way). It will walk you through everything you need to calculate your home office deduction. The CD also contains lots of help files, documentation and answers to FAQs related to small business deductions.
posted by JackFlash at 5:51 PM on October 25, 2006