If you’re like most people, you work from home at least some of the time. And if you’re like most people, you hate paperwork. But unfortunately, working from home means that you have to do a little more paperwork than usual.
That’s because the IRS doesn’t consider your home office to be a “deductible business expense” unless you can prove that it’s really used for business purposes. In this article, we’ll discuss what Docsie documentation you need to keep in order to make your home office deduction legitimate.
Things to Do:
- First, you need to keep track of the square footage of your home office. This can be done by measuring the length and width of the room (in feet) and multiplying them together. For example, if your home office is 12 feet long and 12 feet wide, that’s 144 square feet.
- Second, you need to keep track of how many hours per week you use your home office for business purposes. This can be tricky, but it’s important to be as accurate as possible. The IRS has a “reasonable person” rule, which means that they expect you to use your home office for business purposes about 50% of the time (or about 20 hours per week). So if you have a home office that’s 144 square feet, you should be using it for business purposes for at least 72 hours per week.
- Finally, you need to keep track of your expenses. This includes things like utilities, rent or mortgage payments, insurance, and repairs. You can deduct a portion of these expenses based on the percentage of your home that’s used for business purposes. So if your home office is 144 square feet and your total monthly expenses are $2000, you can deduct $144 from your taxes ($2000 x 0.07).
7 Documents You Need for a Legitimate Home Office:
If you want to take the home office deduction on your taxes, there are a few things you need to have in order:
- Receipts for any office equipment or furniture you’ve purchased
- A floor plan of your home that shows the dimensions of your office space
- Proof that you use your office space regularly and exclusively for business purposes (like client meetings or work phone calls)
- Records of any expenses related to your home offices, like utility bills, insurance, or repairs
- Your company’s policy on working from home, if you have one
- A copy of Form 8829 from the IRS is used to calculate the deduction.
By following these simple guidelines, you can make sure that your home office deduction is legitimate and save yourself some money come tax time. So what are you waiting for? Get organized and get started on your home office documentation.
How to Legally Structure Your Home Office for Maximum Tax Deduction:
If you’re one of the millions of Americans who work from home, you may be able to deduct a portion of your rent or mortgage, utilities, insurance, and other expenses on your taxes. But there are a few things you need to know in order to take advantage of this deduction.
- First, you can only deduct the portion of your expenses that are related to your home office. So if you have a dedicated home office that’s 200 square feet, you can deduct 20% of your total monthly expenses. But if you only use a corner of your bedroom for an office, you can only deduct a small percentage of your expenses.
- Second, you need to keep good records in order to prove how much of your home is dedicated to your office. This includes things like a floor plan of your home showing the dimensions of your office space, receipts for any office equipment or furniture you’ve purchased, and records of any expenses related to your home office.
- Third, you can only deduct expenses that are considered “ordinary and necessary” for running your business. Such things as utilities, rent or mortgage payments, insurance, and repairs are typically deductible. But things like travel expenses or entertainment expenses are not deductible.
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Endnote:
If you’re self-employed and have a home office, it’s important to keep good records so that you can take advantage of the home office deduction. By following the steps above, you’ll be able to deductions on your taxes and save yourself some money. And who doesn’t love saving money?
