Are You Forgetting Your Most Important Tax Break?

If you use your apartment for business, you may by missing out on one of the best tax breaks available to you. There are many perks to working out of your Pasadena rental apartment such as being able to set your air-conditioning where you want it, having your favorite kind of music playing, and working in your sweats or comfiest clothes. But if you are working out of your home, there is one tax break you may not be aware of. This is that you may be able to deduct your home office space from your taxes.

FAQs Regarding Home-Office Deductions When You Rent

I do most or all of my work out of my apartment, does this qualify me?

In order for you to qualify for this deduction, the IRS states your home must be your principle place of business. However, unlike the popular misconception goes, the only place you can work from is a dedicated “home office space”. You can work from other areas, but you must have one area of your home in which you do regularly conduct business. Even if you do conduct a percentage of your business from another location, such as a shared office, as long as you conduct the majority of your business from your home, you should be able to claim this useful deduction.

Any Other Requirements

Yes, the area you choose to conduct your business from in your home must be used exclusively for business purposes. Of course, you can work elsewhere in your home, but plopping down at the kitchen table with your laptop will not instantly transform your kitchen into an office space. The same applies if you have a client come to your home and you sit in the living room instead of your office. While the space doesn’t have to be in a separate room, it does have to be in a separate part of the room.

Do I Have to Be Self-Employed?

Most people tend to think that only those who are self-employed can take this deduction. This is not the case as many employees are also able to claim it. But, there is a caveat. Working at home cannot be simply because it is easier for you than commuting to the office every day. It has to be for the convenience of your employer as well. On top of this, you have to pay all of the costs yourself, your employer cannot pay any portion of the rent.

What Costs Can I Deduct?

Any payments you make to your landlord in the form of rent can be deducted. Along with this, costs such as electricity, renter’s insurance, climate control systems, even a security system may also be included. You may also be able to deduct the cost of a second phone line and your internet service. (Bear in mind the IRS will not allow you to deduct the cost of your primary phone line.

While it is quite likely you will be able to claim this deduction if you work from your rental home or apartment, you should always contact your tax professional before you file your next tax return. This is only a general guideline intended to show you what the IRS has to say about claiming your home office as a tax deduction.