I've recently had a couple of folks mention they have not been claiming the business expense of Office in Home as a sole owner business person.
This is sad for them. They have a portion of their home that is regular and exclusive business use. They have not claimed the deduction because years ago someone said "that is a red flag to IRS".
IRS publication 587 is about 33 pages long and it clearly discusses how Business Use of Your Home is allowed if you meet the rules.
It is not a real big deduction for most folks. Only 5 percent or maybe 8 percent of the home is usually the business portion.
Business expenses save two kinds of taxes. Income tax is saved and also the Self Employment Tax is saved (assuming there is a profit from the activity).
More importantly, with a home office, more deduction is allowed for business driving.
The drive from the home office starts the business driving. That means no commuting driving that is not deductible.
The IRS publication explains on page 3 "... the space does not need to be marked off by a permanent partition ..." It can be even just a portion of a room. We suggest you take and save photographs of the business area that is regular and exclusive business use.
Page 4 of the publication lists activities that do not disqualify your home office, with examples.
If it was only business use part of the year, you can claim that part of the expenses.
Some items are partly deductible (the business use percentage) that would otherwise be non deductible. Examples include insurance premiums, repairs, security system, utilities, etc.
The depreciation expense deduction is a bit more complicated, but every little bit helps save taxes. Once you get the depreciation schedule set up, it will be easy to figure in the future years. It all adds up to less taxes paid, you keep more.
Please don't pass up tax savings for a home office if it is regularly and exclusively business use. "Don't fear the IRS" is a good motto. If you can't print off a copy of publication 587 from irs.gov, stop by our office and we will give you a copy, free.
Did you hear "Make new friends and keep the old; one is silver, the other gold."
• John Bullis is a certified public accountant, personal financial specialist and certified senior adviser serving Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs, LLC.
