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I am about to deduct tax for my home office space for the first time and I am wondering about a few things that you guys maybe able to help:
1. How do you compute percentage of mortgage interest that you can deduct if you have home office in the basement? Basement is not typically counted towards the sq feet displayed on real estate listing but for tax purpose we just include basement as a total sq feet?
2. What about electricity, gas and water? Just use the same percentage as in #1?
3. For internet bill, I use a lot more internet for my business than other purposes. Do I have to deduct based on percentage as in #1?
If you use your entire basement, and it represents 15% of your total pace, use 15%.
Use the same for utilities, etc.
The worst that happens is you get audted (unlikely), and you have to explain why you used what you did. They are not looking to crucify you as long as your explanations are logical and 'in-line' with something 'normal/practical'.
Being reasonable is all they are looking for. They can spot fraud a mile away...even if they don't get around to actually prosecuting it.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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That's one of the most common reg flags for audit, but I managed for a few years. Just be honest, don't use that space for anything other than the work, and have proof that you spent time actually working, especially if there is little or no income. They are after people that make up a business to take advantage of the tax break to help with their big mortgage.
id sit and ask a tax pro to be sure of everything, -pay for the half hour,
also ask how it will affect the value, if and when you sell your home.... ask if you have to pay some of these deductions back if you sell
I am about to deduct tax for my home office space...
Unless your business use of that space and the utilities is significantly out of proportion
to the needs and uses of the house as a whole... don't bother.
Oh Happy Day!! I can ditch my "Home Office Expenses" spreadsheet that I spend about 30 minutes on each month (or half a day each tax season if I'm slack ). Of course, I may keep it this year just to see if I'd get more of a deduction by itemizing my expenses.
The new rule will take effect for tax year 2013 and not the tax-filing season starting this month.
Taxpayers will be able to deduct $5 per square foot for up to 300 square feet of a home office.
WooHoo! That 10x10 spare bedroom or little corner in the basement... $500.
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