Tax Tip: Business Use of Your Home

If you use an area of your exclusively for business, it is eligible for a tax deduction on your taxes. But it's kind of a pain to get through all the hullaballoo to deduct it. But it's doable. You can even do so if you rent. But you should be aware that the IRS is fairly stringent about what qualifies as "business use." Here are is the list:

• Area in question must be used only for business
• You should have good records showing utilities and other items paid
• Only utilities that you pay in the area can be counted (for instance, you can't deduct water costs if you don't use water in the area)

It's pretty strict. But all is not lost. To figure the percentage of your expenses for business use of your home, you divide the square footage of the business area by the total square footage of the home. This means that you don't have to do it in whole rooms. The room my office is located in also doubles as storage and my husband sometimes moseys in to do homework on his laptop. The solution? I only deduct the 5x5 area around my desk. It's only about $100, but that is another $100. And this year it's just enough to nudge me down into another level on the tax table. And it's bumped me down to be eligible for more in my child care credit. So, it'll end up being worth more than $100. If you rent, however, you should note that in the columns on Form 8829, your expenses go in column b, which is for indirect expenses. You can get more information by watching this video on home office tax deductions. tax tip, personal finance, financial planning, finances, tax credit, tax deduction,