Tax Deductions When You Work From Home

I never aspired to own my own business. Before I became a stay at home mom, I always worked for other people, who took care of taxes for me. When I started this blog, and it began making money, suddenly I had to worry about more than taking the standard deduction. As a blogger and freelance writer, my taxes have become more complicated.

IRS 1040 Tax Form Being Filled Out

As online entrepreneurship grows, more and more people are needing to become savvy about what they can and cannot deduct when working from home. These are a few of the things I’ve learned along the way.

Home Office

I personally do not deduct anything for a home office. Why? I generally write from my couch or my bed, and to deduct a home office, you need to exclusively use your home office for business. If you have a room or space in your house set aside for business, it’s a good deduction. But if you use your space for anything else, you can’t deduct it.

Utilities

You can deduct a phone line, if it’s a separate business line. The same goes for a cell phone. If you don’t use a separate line for business, you can deduct the percentage of the line that you do use for business, but you have to keep really good records. The same goes for your internet connection. Deduct the percentage of the bill that you use for business, but make sure you have the records to back it up!

Theoretically, you could deduct business use from other utilities, too, but I don’t keep the records to back up that deduction, so I don’t do it.

Transportation

If you use your car for business, you are allowed to deduct either a percentage of your actual car expense or mileage, but not both. I generally deduct mileage. Certain rules apply, though. Once again, you need to keep good records. Record your mileage at the beginning and end of every year. Record every trip you take for business, noting where you went, why you went there, and how far your traveled. And each mile you deduct needs to be for business purposes only. So if you decide to check your PO Box for business, but stop on the way home to pick up some groceries, you can’t deduct the mileage.

Other Common Work From Home Deductions

The three most confusing deductions for those who work from home are listed above. Don’t hesitate to deduct other common self-employment expenses though. There are many.

  • Advertising expenses
  • Equipment (like computers)
  • Professional services (like an accountant or attorney)
  • Office supplies
  • Travel expenses related to your business
  • Licenses and fees
  • Publications necessary for your business
  • Wages to employees
  • Photocopies
  • Education/Classes necessary for business

There are tons of deductions for those who work from home. Tax programs like TurboTax do a good job of walking you through all the possible deductions you can take. However, once your taxes begin to get really complicated, it’s a good idea to have an accountant look over your taxes. It never hurts to have someone knowledgeable make sure you’ve deducted everything you can, but not more.

Did I miss anything? If you work from home, do you do your own taxes or pay an accountant?

Photo by SeniorLiving.org.



Author

By , on Jul 25, 2012
Lynnae McCoy I'm Lynnae, wife of one and stay-at-home mom of two. I'm committed to getting out of debt by being frugal with my choices in life.

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{One Comment}

  1. You can also deduct the price of business software including TurboTax! :)

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