Tax Facts

Home Office Measurement Methods

In today's economy and with today's technology it is becoming more common that people work as independent contractors, statutory employees or simply have side jobs in the evening that provide extra income. For each of these scenarios, a person might use part of their home as their place of business.

One of the first things you'll have to do when meeting the requirements for and intending to take a home office deduction on your tax return, is to estimate the amount of space in your home you're using for business. There are two ways you can do this:

1. Measure the square footage of your office space. Then divide this by the total square footage of your home. Many taxpayers do not know this additional tip - you can subtract from the total area of the home, the square footage of the common areas. For example, you can subtract the area of hallways, attics, stairs, landings, garages from the total area of the home. This will yield a higher percentage of business use space (with the smaller denominator) and therefore increase your deduction of the home office expense.

2. The alternative method is to count up all the rooms in your home - one caveat, though...the rooms in your home should be approximately the same size or this method will not work; nor will it pass inspection during an audit. You don't have to include bathrooms, closets or storage spaces - which includes attics and garages when counting rooms. You divide the number of rooms you use for business purposes by the total number of rooms.

It's a good idea to compare methods and use the one that provides the higher percentage - as this will provide a higher deduction for you and ultimately a lower tax!

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Safe Harbor Home Office Deduction

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