If you are eligible to take the home office deduction, you must follow the very detailed rules the IRS has for deducting your home office expenses. Since it is a complicated deduction and often raises red flags for audits, it is always best to consult a certified accountant or the IRS to determine the deductions for your individual situation.
What Types of Home Office Expenses Can You Deduct?
For the home office deduction, you can deduct expenses that are considered to be direct and indirect to your business.
- Direct Expenses- These are expenses that are only related to the home office, such as painting the office. You can deduct the full cost of these expenses.
- Indirect Expenses- These are expenses related to keeping your whole home running, such as utilities and insurance. You cannot deduct the entire cost of these expenses. You can only deduct the percentage applicable to your home office.
What Specific Home Office Expenses Can You Deduct?
In general, you may be able to deduct the following:
- Real estate taxes
- Mortgage interest
- Mortgage insurance premiums
- Casualty and theft losses
- Depreciation- (on home, improvements, business assets, home security system)
- Security System
- Utilities and Services
- Business Supplies
- Business Phone Lines
*You should always consult the IRS or a certified accountant to decide what deductions are applicable to your specific situation.