ForumsTaxes and Payroll

I write off home office expenses... paper, office supplies but not the space. The key for taxes is 'exclusive use' of the space for business and that counts for computers as well. I have comandeered two rooms in my house..computers and printers in both rooms...personal and business stuff everywhere...who would I be kidding? Yes I transact tons of business in both spaces...but exclusively? Nah. Could be more trouble than its worth.

Techie, 3 good answers so far. Sounds like you have been working from home for a few years??
This is a perfect time to start for Next year, (this being Jan 2) Look at last years tax return for categories
of expenses. ALL business expenses (legitimate or not) should be written off.
Do you have an accountant?? How do you keep track of income and expenses??
You can use the computer, a diary, credit cards, calendar or even a show box.
My suggestion, keep improving the income and the gross profit.
LUCKIEST

The biggest portion of your deduction will come from things you probably have readily available -- mortgage or rent payments, taxes, insurance, and utilities.

In claiming home office deduction, does anybody know what tax consequents you have when you sell your home?

If you qualify for the residential exclusion from capital gain you have to consider a sale as two separate sales, one for the residential portion and one for the home office portion as regards to the depreciation taken in prior years. The home office portion is subject to capital gains tax for the same percentage as that taken each year. Any gain would be subject to depreciation recapture at regular income tax rates for any prior depreciation taken. The remaining gain would be subject to capital gain rates. The residential part of the calculation is excluded from tax altogether.

A good tax strategy is to to find a way to not qualify for home office (not difficult, just say you don't exclusively use) 2 years prior to selling. Then the business home office part will qualify for residential exclusion (2 of the most recent 5 years) and only the depreciation taken in prior years would have to be recaptured. Everything would qual;ify for capital gain exclusion. You may want to have a CPA do your tax return the year you sell and you may want to develop a strategy similar to the above with a CPA several years before selling. IRS has been known to change the rules on us from time to time.

NYTaxguy is right on target.

Before you go to all the trouble of writing off home office expense an then having to worry about the tax recapture, do the math. In many cases the small tax savings are not worth the additional record keeping and tax prep work.

Absolutely DO keep track of all office expenses such as internet, office phone etc.

Planning any vacations soon? Try to schedule some type of work around/into your vaction and yoy may be eligible to write off part of the expenses. Ask your accountant for guidence.