Sharon at Mom on Dealz started a great new series called Ask An Accountant. She has offered to share these question and answer sessions with Living on Love and Cents! If you have a tax / money questions send an email to the address below! Thanks Sharon!
As we all know, it’s that dreaded time of the year-Tax time! In honor of tax season, I have a new series called “Ask An Accountant”. Send in your tax questions each week to firstname.lastname@example.org and I will post the question and give an answer from an experienced accountant
How do I determine the amount of office space to use for a write off?
A home office is defined by IRS guidelines as “any area of your home used exclusively for business”. This means, it cannot serve any other purpose other than business use. If an area of you home qualifies, the easiest way to determine the area is to estimate the square footage of the business area of the home as a percentage of the entire square footage of the home.
This is reported on Form 8829, then you are able to apply that percentage to mortgage interest, real estate taxes, hazard insurance, repairs, and utilities and get a better deduction than you would normally get from those items on schedule A. The remaining percentage of the mortgage interest & real estate tax then goes on the appropriate line on Schedule A.
Here is an example: Your home is 1,000 sqaure feet and your home office is 100 square feet. Therefore your business percentage is 10%. You would then apply the 10% to your mortgage interest, real estate taxes, hazard insurance, repairs, and utilities. Your remaining percentage of mortgage interest and real estate tax would be 90% and would go on your scedule A.
*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.