What can I write off tax-wise by working remotely from my home office?

Question

I started a new job May 1st where I work from my home office. I'm a Sales Director and my corp office is in Phoenix. My company already pays for my landline phone and high speed internet service. I am being told that I can write off part of my mortgage as well as my utility bills. Other than telling me to talk to an accountant I am looking for some quick answers. Thanks!

And yes... my company expects me to maintain my home office so it's not a personal choice but a corporate one.

I am using one of my bedrooms exclusively as an office and I work 8-10 hours a day in this space. My taxes are professionally done so I am sure I will get my answers tax time. I just wanted to get a heads up on some of the stuff I could write off.

Answer 1

Is your company requiring you to maintain a home office? If so then yes you can write off part of your house expenses. What you can write off is the % that your home office is in relation to your entire house. If your home office is 10% of your whole house, then you can write off 10% of your house expenses. The only thing is you won't get any additional benefit from your mortgage (and it's only the interest that you pay that you can write off, not the principal) or real estate taxes, as you should already be deducting those 100% on your Schedule A - Itemized Deductions. You would report the house expenses on form 8829 - Expenses for Business Use of your Home. Which will then flow over to Form 2106 - Employee Business expenses, which will flow over to Schedule A - Itemized Deductions under miscellaneous deductions. The amount in total for miscellaneous deductions will need to exceed 2% of your AGI for the excess to be deducted (this is why you don't want to put mortgage interest and real estate taxes on the Form 8829, you lose some of the amount that way). Expenses that you can deduct on the Form 8829, would be utility bills, house insurance, repairs, maintenance, heat, electric, water, sewer, etc.

I've attached links to information about home office to help you see if this is something that you can use for your taxes.

Answer 2

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Answer 3

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Answer 4

You may be able to take a deduction for a home office IF it's required by your employer and for your employer's convenience, not yours. Generally if you're REQUIRED to telecommute then it's deductible. But if you're only ALLOWED to telecommute for your own convenience and at your discretion it is not allowed.

You have to set aside an area for exclusive business use. No personal use is allowed at all. Although it does not have to be an entire room, dedicating a room for business use makes it easier to assess the business portion and justify the exclusive use.

The deduction is based upon the proportion of the business space compared to the entire floor space of the home. If 10% of the space is used for business, then 10% of mortgage interest, property taxes, some repairs & maintenance, utilities (excluding phone but not business long distance charges) and depreciation can be deducted as business expenses.

Keep in mind two important issues:

1. The IRS watches the home office deduction very closely. It's the second most frequent audit trigger, just behind the EIC. If you're entitled to it, take it, but make sure that you can justify the use and the numbers.

2. When you sell your home, any depreciation allowed OR ALLOWABLE will be subtracted from the basis of the home and will be taxed at the appropriate capital gains tax rate even if you are eligible to the exclude the gain on the sale of a personal residence. Note the emphasis on OR ALLOWABLE! Even if you don't take the depreciation portion of the deduction, it will affect your tax position when you sell! You could sell at a loss and still have a taxable gain!

In most cases the allowable deduction is rather small with minimal tax benefit since it's subject to the 2% AGI limitation. When the depreciation recapture is taken into consideration, some taxpayers conclude that it may not be worthwhile.

Answer 5

Your mortgage is already deductible. It makes no sense to allocate some of it to the home office.

First of all, you need an area of the home that is used "regularly" and "exclusively" for the work activities. Exclusively means exactly what it says. You use this area for nothing but the position as Sales Director. A computer and desk that all of your family uses would disqualify the deduction. If you have an area that does qualify, you need to determine its size relative to the rest of the home (ie. 5%, 10%). This would allow you deduct a like percentage of utilities (electricity, water, garbage, etc.) as well as allow you to depreciate this part of the home.

The form that you would use is the 8821 (I think). The deduction gets entered as a misc. itemized deduction subject to 2% of your income. If your salary is relatively high, the tax benefit may be minimal if not non-existant.

All that being said.....you should probably see a professional in your area.

Edit:

The workspace does not have to be the entire room. It can be part of the room. You would get a smaller deduction but it would help pass muster if you examined. Taking a deduction for the whole spare bedroom is a red flag....especially if there is a bed in there. A relative or friend spending one night there fails the exclusivity rule. There have been home office deductions disallowed because there were out of season clothes stored in the closet or a TV in the corner.

Answer 6

I am not sure how a work from home job compares to a Home Based Business, but I was able to write off my Cell Phone, Phone line, pens, paper, ink for printer, partial mortgage, partial utilities, internet, etc... All things for my Home based business.

You can only get credit on partial mortgage and utilities because you are only taking up a portion of your residence.

Again I do not know if a stay at home job would enable you to write these things off, but this is just one benefit of having a home based business. The tax benefits are worth having it even if you make Zero money doing it, as they are all expenses. We were able to get an extra $800 on our tax return because of these deductions.

I would recommend talking with a tax adviser first before trying.

Answer 7

Telecommuting Tax Deductions

Answer 8

PepsiLime is very correct on this. Here's what I was told when completing my Form 2106:

I could list any costs for the copier, ink, paper, etc
my cell phone- if used strictly for business
my fax line
postage & shipping expenses used for work
customer gifts & cards (must be under $25 each)
1/2 of meals if I took a client to lunch
unreimbursed mileage if I used my personal car to see clients, go to meetings, etc

IRS website spells out everything you can and cannot do. Check there before you toss out any receipts this year!

Answer 9

the cell phone or even a land line would have to be a second one, one would be for personal use, the other only business and the space you use for your home business must be exclusive to its use, nothing of a personal nature will apply ie. the kitchen table will not work you can claim the % of your home maintenance as the business space related to the total. a new more simplified application is available for 2013, up to 300Sq ft. for $1500 without having to complete form 8829 and no, this is not reimbursed to you, you report your income on Sch C and any expenses you incur for the business reduces your profit on which your self employment tax is calculated(Sch SE) and if you are making any profit you need to prepay and file the taxes you anticipate you will owe, on form 1040ES, Sept and Jan

Answer 10

write taxwise working remotely home office