It’s not uncommon for entrepreneurs to start conducting business from their home office (at least in the beginning). Not only is it a great way to minimize office space rental costs, but you can also save money on commuting and dining out (if you can keep your trips to the refrigerator to a minimum, that is.) If you are conducting business at home, you can also write off your home office to reduce your tax liability.
If your accountant has ever told you that a home office deduction will put you at an immediate risk for an audit, please consider hiring a new accountant. Not only is a home office deduction LEGAL, MORAL, and ETHICAL, but there are four different ways (YES, FOUR!) to do it. If writing off your home office was risky, why on earth would the IRS give you four ways to do it?
Here are Four Legal, Moral, and Ethical Ways to Write Off Your Home Office:
- 1. Depreciation – Don’t do this one; VERY rare when this is best.
- 2. 14 -Day rental rule – Rent your house (to yourself even) for 14 days, there is an actual box on your tax return for this one, it says “14 Day Rental” next to it.
- 3. B.U.P. 1 – Business Use Percentage based on square footage (better for smaller homes)
- 4. B.U.P. 2 – Business Use Percentage based on number of rooms (better for Texas-sized homes)
So as you can see, writing off your home office is not only legal, moral, and ethical, but it’s also pretty smart. At Financial Gravity, reducing your tax liability is ALWAYS a green light.
Want to discover more LEGAL, MORAL, and ETHICAL ways to reduce your tax liability? Download our eBook today. Did we mention that it’s FREE?
*image by Gabriel Beaudry