Monday, August 15, 2011

taxes; deductions; working from home - latimes.com

taxes; deductions; working from home - latimes.com

The Internal Revenue Service doesn't publish black-and-white rules on every aspect of the topic. Instead it's up to the small-business owner — and his or her tax preparer — to be able to make the case to the IRS as to whether something is a legitimate home-business expense and to what extent.

To be deductible, a home office space "has to be used on a regular basis and exclusively" for the business, said Sam Jarrar, a certified public accountant in Marina del Rey.

Even a corner of a room can meet that test and be deducted, he said. But no working on the family finances in the home office, not matter what size it is.

The deduction is based on what share of the total space in a dwelling the home office takes up. If it's, say, 20%, then the business owner could deduct that portion of a number of indirect costs — such as utilities or real estate taxes — as a business expense. A renter could deduct that percentage of the rent payment.

If the home office deduction is taken, direct costs related only to the space, including repairs or wallpaper, can also be deducted.

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