Taxes – Part 2 – Taking a Home Office Deduction
If you are setting up your courier service you should not forget that you are actually running an HBB (home based business). This usually means that you can use an empty or spare room in your home as a business office, and if you set it up properly you could also enjoy a home office tax deduction.
What does it mean to set it up properly? Well, the IRS wants an office claimed as a home office to be used strictly for that purpose.
If it has your spouse’s exercise bike, the holiday decorations, a spare bed, and a bunch of other items in the same space then it cannot qualify as something dedicated entirely to your work.
If, however, the space is free of everything except the devices used to run the business then you can go ahead and use it as a true home office deduction. This means that you will be able to opt to write off the operating expenses for the space, including the heating and cooling costs, electrical services, and even the phone and Internet service supplied to that room as well.
You must take the square footage of the home, and also measure the square footage of the office itself. These figures are then used to determine the percentage of each bill that can be attributed to the home office space.
Of course you must also include the furnishings, electronic devices, and the office supplies in the calculations too. This means that you usually can elect to take the full deduction for a work desk, filing cabinet, and new computer in a single year, or to space it out over several years.
It also means that you will have to keep extremely accurate records of all of the expenses associated with the room as well. Most startups will hire a qualified tax professional to walk them through the preparations of their first tax return, and then will usually handle them independently from that point onward.