Posted on June 08, 2006 at 20:00:39:
If you are self-employed and work from an office at home, you are sitting on a nice tax deduction. You may even qualify if you are an employee not provided an office by your boss.
In addition to the usual business expenses like a computer and fax, paper and subscriptions, extra phone line – a wide variety of necessities – you can also deduct the office real estate. If your office takes up 10 percent of your floor space, for instance, you can deduct 10 percent of your real estate taxes, 10 percent of your energy costs and so on. A big item is depreciation of the value of the office real estate. When the house is sold, though, the depreciation gets “recaptured” and is taxed at 25 percent.
Is the home office deduction worthwhile? You could deduct business expenses anyway, and real estate taxes elsewhere. But the home office deduction package serves an important purpose: it trims business income – and the self-employment tax paid on it.