Wednesday, September 12, 2007

Home Office

If you have a business in your home, or use part of your home as an extension office for any business, you are probably aware of the home office deduction, which can save a bundle on your taxes. But did you know there are alternate methods for computing the deduction?

Most people know they can take the deduction based on square footage. For example, if your office is 200 square feet of a 2000 square foot home, your deduction is 10%. But the IRS code also allows you to choose any other reasonable method for determining the deduction, including the number of rooms. In the same 2000 square foot home with a total of 8 rooms, if your office is one room you could deduct 12.5% because it is one room of eight. If you use two rooms for office, your deduction could be 25%. And that sure beats the heck out of 10%!

So, before you settle for a square footage deduction, check to see if another method will give you a bigger deduction.

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