Home Office Tax DeductionsA home office deduction is well worth considering if you work, or run your business, from home. Depending on your local tax law, you could be eligible for some tax relief.
What this means is that if you able to qualify for this tax relief, you can reduce your tax bill accordingly and retain more of your business profits. Naturally, the Inland Revenue is very careful to outline who does and doesn't qualify for a home business deduction. You must check carefully to ensure that you are genuinely eligible.
IMPORTANT: The information in this article applies generally, but the rules in each country may vary. Be sure to check the website of your local tax office for more information
The business expenses that you claim for should be carefully reviewed and calculated so that the Inland Revenue perceives them as normal and not outside the realm of reason. Claiming too much in this area could result in a visit from the tax man and probably a time-consuming audit.
To be eligible for a home office deduction you must have a designated room or area in your home that is used specifically for your business, on a regular basis. Your main business dealings should be done in that room or area including client meetings and administration.
When you calculate your tax bill, you should be able to reduce it by an amount that represents the electricity you used to operate your business. As a rough guide, to figure out the amount of electricity that is used by your business, simply divide the cost of the entire bill, by the number of rooms in your home.
Another way of meauring this is to calculate the square footage of your residence and then deduct a proportion that corresponds to the size of your main office area.
It's possible that you could even be able to claim back some of your mortgage payments. A prudent step would be to obtain the services of an account who can advise you how to work out the appropriate amounts.
Additionally, business expenses can include repairs, maintenance and water bills. File and archive all of your bills so that, when it's time to calculate your tax relief, you can figure out the appropriate amount. Unfortunately, things like entertainment, phone lines (unless you have a separate, dedicated phone line) and internet costs cannot be claimed back.
A home office deduction could make the difference between your business going under, or surviving for another year. If you are operating a legitmate home business, you should definitely look into claiming back some of your expenses. Whether you are a home business owner working as a self-employed individual, or simply working for an employer out of a home office, you should take the time to find out if you are eligible for tax relief or other benefits.
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