You’re dream of working from home is finally a reality. Sure, there are plenty of pros to working from home, but you’ll soon find out that there are some downsides-one being that it can cost you plenty. Work-from-home expenses can range from the cost of high-speed internet to stay in contact with clients, to the new desk that your computer and office supplies sit on.
Fortunately, the government helps you out and and offers tax deductions to people who work out of their homes. Below are 7 Tax Deductions for people who work at home.
7 Tax Deductions for Self-Employed
According to IRS guidelines, the following can be deducted:
1. Home Office
When you have a dedicated room or workspace in your home you use only for business purposes, it counts as a “home office” and is a big deductible space on your tax return. Note: This space has to be legit: It can’t be your kitchen table, or your comfy spot on your couch. Think, a spare room-or even your garage.
You can deduct 10% of your home’s square footage. This means you can deduct 10% of the following:
- Rent (NOT monthly mortgage payments).
- Utilities (heat, electricity, internet, landline).
- Mortgage interest.
- Homeowners insurance.
- Property taxes.
2. Office Supplies
You can deduct all office supplies-from staples to printer paper. If it’s essential to your business, you can probably deduct some furniture as well.
Another helpful tax deduction is on any equipment you need for your business. This equipment included things like computers, printers and accessories like headsets, camera, etc.). Deduction go as far as any repairs on these items. If you use your smartphone for business, you can deduct the cost of the phone AND monthly bill.
Some work-at-home businesses need to rely on software to help run their business. You can deduct that. Such software like PDF software, editing software, graphic design software, etc. Make sure that these programs are strictly used for business. If you pay for monthly for a service, that fee qualifies as well.
5. Professional Services
When you hire someone to help you with your business, it’s deductible. When your computer needs debugging, or you hired a sales tax filing service to put together your tax returns, keep track of those expenses for deductions.
6. Meals and Entertainment
There’s a fine line between what counts as a deduction for meals and entertainment. Don’t be tempted to write off a business meeting that really wasn’t strictly business.
Example; A meeting over coffee with a potential client- deductible. A dinner with friends where you spend 15 minutes talking business? Pushing it!
As a rule, expect the IRS to limit your deductions to 50% of business-related “entertainment” costs, so keep things modest. For additional guidance, check out the 2018 update from the IRS.
7. Marketing and Advertising
Marketing is the heart of whether a business makes it or not. The IRS understands this! So, if you sent out flyers or purchased a 100 business cards, it counts as marketing, and deductible. This holds true even with the fees connected with a personal website, like hosting fees, WordPress theme purchases, etc.