Are you self-employed or a small business owner? If you work from home you may be able to take the home office deduction. Here is what you need to know to figure out if you qualify and get a better understanding of how this often-scary deduction works.
The home office deduction has a reputation for being an audit red flag. While this may be true in some cases, you have nothing to worry about if you have good records and actually qualify for the deduction.
Working from home sure has its benefits. You can’t beat the commute and you might have more time to spend with your family. The cherry on top may be some extra money in your pocket from not having to pay for an office and from a potential tax deduction.
Growing numbers of solo-preneurs and small business owners working from home have made the home office deduction an even more important topic for you to understand. I’ve spoken with many business owners over the years who are likely eligible for this tax break but don’t take it. Why? Because they are just afraid of any undue scrutiny of their tax returns.
Tax law is complex and, with the new GOP tax plan, things are not going to get any easier for the self-employed. The record-keeping hassles of the home office deduction have scared many away over the years. Also, there is a depreciation recapture provision that could mean higher taxes if you sold your home after taking the home office deduction.