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Home Care Library

Avoiding Home Office Tax Traps

Telecommuting, small-business start-up, or just a quiet place to get work done at home . . . more of us are setting up home offices. The IRS allows you to take a tax deduction for your home office, but you will want to be sure to avoid some common tax traps that can come back to bite you.

If you are thinking about claiming a portion of your house as a “home office” here are some things that you will want to consider:

  1. If you haven’t already done so, you should talk with a Certified Public Accountant (“CPA”). They have the training and experience to advise you on the requirements and specific record-keeping practices that you will need to follow.

  2. Claiming a home office is very likely to increase your risk of getting an audit from the IRS.

  3. Equipment that you use in your claimed home office will need to be used 100% for business purposes.

  4. You will need to keep detailed records of how you use your home office.

  5. If you have been claiming a home office deduction, and you sell your home that was your principal residence for 2 of the previous 5 years, then this could have tax consequences for you when you go to sell your home (helpful accessories: home business tax deduction books; tax computation softwares).

However, as an alternative to claiming a home office deduction, you should talk to a CPA about other ways that you can legitimately deduct expenses associated with the work that you do from your home

For example:
  1. Deducting portions of your home utility bills.

  2. Deducting the costs of supplies that you use.

  3. Deducting a portion of the cost of your rent or home mortgage interest.

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