Taxes Made Simple

Mike (marketing consultant) asks:

Hi Mike. I'm self employed as a marketing consultant. I work only out of my house. How do I know if I qualify for the home office deduction?

Answer:

[Note: The following discussion of the home office deduction is an extreme summarization. For a more thorough discussion, please see Instructions to Form 8829.] 

If you use a part of your home regularly and exclusively for business, you can generally deduct the expenses related to running that part of your home.  (This "home office" does not necessarily have to be set apart from the rest of your home by a permanent partition.  It could simply be a portion of your living room, for example.) For reference, the IRS isn't kidding when they say "exclusively."  They mean it.  That said, this deduction can be very beneficial for home-based business owners, so it may very well be worth the hastle of jumping through the hoops required to be able to take it.

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