J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

CHAPTER 18

Home Office Deductions

Alert

At the time this book was printed, Congress had not extended numerous breaks for 2012 that had expired at the end of 2011. Check the online supplement in February 2013 at www.jklasser.com or www.barbaraweltman.com to see whether these breaks apply for 2012 returns.

Today over 40 million Americans work at home at least some of the time, and the number is growing. Computers, faxes, modems, and the information highway make it easier and, in some cases, more profitable to operate a home office. The U.S. Small Business Administration reported that 52% of all small businesses are home-based and that they generate $102 billion in annual revenue; the average return on gross revenues for these businesses is 36%, compared with just 21% for non-home-based businesses. As a general rule, the cost of owning or renting your home is a personal one and, except for certain specific expenses (such as mortgage interest, real estate taxes, and casualty losses), you cannot deduct personal expenses. However, if you use a portion of your home for business, you may be able to deduct a number of expenses, including rent or depreciation, mortgage and real estate taxes, maintenance, and utilities. These are collectively referred to as home office deductions. They are claimed as a single deduction item. The deduction is allowed for both self-employed individuals and employees who meet special requirements.

In this chapter you will learn about:

• Home office deductions ...