Aron Govil- How Much Can You Save By Claiming Home Office Tax Deductions?

If you work from home, one tax deduction that is available to you is the deduction for a home office explains Aron Govil. Even if your business runs out of your living room and there’s no official office space, you may still be able to write off certain expenses on your taxes. Here’s what you need to know about this deduction, including how much it might save you in the long run.

Home Office Deduction Basics

 Generally speaking, if you are running a business from your home office, you can deduct any expense related to the business use of your personal residence. This includes mortgage interest, real estate taxes, fire insurance, utilities (if used only for business), repairs and maintenance costs, security systems, facilities used exclusively by employees, and depreciation (more on that below). In addition, you may also be able to write off a portion of your rent or mortgage as a business expense if part of the space is used exclusively for conducting business.

In simple terms, here’s how it works: If you’re renting and pay $1,000 per month in rent, but use one room as an office where you conduct business for four hours every other day, then 50% ($500) can be deducted from your taxes as a home office expense.

If preparing your house to be a home office seems too complicated for tax purposes, there are other ways to deduct expenses related to running a small business from home. In some cases, simply having a separate phone line or internet connection for your home office can help you qualify for deductions.

But if you are able to maximize the home office deduction, it might be well worth the effort. According to a Forbes report, roughly half of U.S. taxpayers are eligible to take this deduction, but only about 20% do so each year. Keep in mind that not all expenses will be deductible – there are some that won’t cut into your savings when you file your taxes.

If preparing your house as a home office is still too complicated, here’s another way with which you can save more on taxes:

Consider Filing a Schedule C

If running your own business out of your home seems like an easy decision to make with potential huge tax cuts, consider filing a Schedule C. Schedule C is a form used by business owners to report their income and expenses. The best part about it is that most of the home office deduction rules still apply – including the fact that you can write off a portion of your rent or mortgage payment as well as other qualifying expenses says Aron Govil.

Simply put, if you’re self-employed, using a home office. And have less than $5,000 in total business expenses. Filing a Schedule C might be the way to go. This will help reduce your taxable income and could save you hundreds (or even thousands) on your tax bill.

Be sure to talk with an accountant or tax specialist. To see if claiming a home office deduction is a choice for you. There can be many rules and regulations that apply to this situation.

What Expenses Can You Deduct As A Home Office?

The specific expenses you can deduct from your taxes will depend on the type of business you operate out of your home. And whether or not it qualifies as a section 179 expense.

But in general, some common deductions include:

Mortgage interest

If you own the building where your office is located. Then you may be able to write off all or part of what you pay in mortgage interest each year. In fact, if any portion of the space is used for conducting business. Such as a small bedroom turned into an office. Then 100% of the interest can be deducted from taxes. Aron Govil says Keep in mind that this applies only to personal residences, and not rental properties.

Real estate taxes

In addition to the mortgage interest deduction for a home office. You can also deduct real estate taxes from your tax return as an expense related to your business. These are typically based on the value of the property where your business is conducted. So you will need to assess what percentage of the total property qualifies as a deductible expense.

Utilities (if used only for home office).

If you use utilities exclusively for your home office. Then 100% of those expenses can be deducted from any income earned. This applies whether it’s gas, electricity, water, internet service, etc. However, if part of your residence is used as well (such as a kitchen or living room). Then you can only deduct a percentage of the total cost that corresponds to the size of your home office.

Office supplies

Almost any expense related to running your home office is deductible. Including pens, paper, printer cartridges, and even coffee for those late nights working! Just be sure to keep track of all receipts and file them away. So you have them when it’s time to do your taxes.

Business travel

If you need to go out of town for a business meeting. Even if you just drive to another city for the day. That travel can be deducted as an expense on your taxes. Just make sure to save all receipts and documentation related to the trip.

Health insurance

If you’re self-employed, you can deduct 100% of your health insurance premiums from your taxable income. This can be a huge saving, especially if you have a family.

Conclusion:

Aron Govil says if you own your home (or even rent, but pay for all utilities). Conduct business out of the space located there, then filing a Schedule C could be worth looking into. You could save money on taxes simply by writing off expenses related to your business activities.