Work At Home Market

A work at home business not only provides an individual with some form of flexibility, it can yield some nice tax deductions. The costs associated with carrying on a business are usually deductible for income tax purposes if the business is structured as a for-profit entity. Prior to starting a work from home business, an individual should be aware of these tax deductions.

There are certain requirements that an individual must meet in order to claim the tax deductions associated with having a home office. There are also limitations on some deductions and consequences of claiming these deductions. Home-based business owners should consult the Internal Revenue Service regulations or a tax professional with any questions.

In general, home business owners cannot deduct personal, family, or living expenses. However, if an individual uses an item partly for business and partly for personal purposes, the cost can be divided and the business portion can be deducted. For example, if home Internet service is used 60 percent for business purposes and 40 percent for personal purposes, the 60 percent may be deducted as a business expense.

Expenses for things such as advertising, office supplies, cell phone or telephone usage, computers, and other office equipment used for business purposes may be deducted either in full or in part. Individuals may also deduct a portion of home real estate property taxes, mortgage interest, rent payments, utilities, renter’s or homeowners insurance, depreciation on an owned home, and painting and repairs. They may depreciate the value of personal property that is converted to business use.

There are very specific IRS guidelines regarding what expenses can be deducted for the business use of the home and other work-related expenses. Work at home moms and other people who earn money by having a work at home business should first determine if they qualify for the home office deduction. They can then begin to calculate the qualifying business expenses that can be depreciated or deducted for income tax purposes.