Tax Breaks
 Attractive and practical French doors allow Sandra Saragoni, a saleswoman for a pharmaceutical company, to close off her home office from the rest of her Marlborough house. (Photo / Pam Berry) |
The Internal Revenue Service allows people who work at home to deduct monthly mortgage or rental payments proportionate to the amount of space used as an office or other work space. For example, if you own a 2,000-square-foot home and your home office is 250 square feet, one-eighth of your monthly payment is deductible from your income.
IRS rules for determining what constitutes a home office are strict. Expenses can be deducted only if the room or space carved out is used exclusively for working. For example, if a guest bedroom or studio apartment has an office in one corner, only that space can be deducted. "You can't use the entire room" to determine the deduction, says Lillian Gonzalez of Sandberg Gonzalez & Creeden accountants in Stoughton.
Home improvement costs incurred to create an office, such as renovating an attic or building a wall unit in a dead space, can be depreciated over 39 years under IRS rules for commercial use. Renovations cannot be deducted from income in a single year. The impact on taxes, due to the 39-year depreciation period, "is very small," said Eugene Tarsky, an accountant with Tarsky Zanchi & Associates in Framingham.
A portion of office-operating costs, such as utilities and homeowner's insurance, may be deducted from income. However, says Tarsky, the sum of these deductions, when added to other office deductions, cannot exceed the operating profits of the business. Unused deductions can be carried over into the next tax year, he adds.
Office equipment, supplies, and furniture are deductible from income. Supplies such as paper clips and pens are fully deductible expenses. Unlike home improvements, office furnishings and computers may usually be fully depreciated in the year they are purchased.
Mileage for commuting from your home to, say, sales appointments or client meetings can be deducted only if the home-office expense is also being depreciated or deducted. The federal deduction is 48.5 cents per mile.
Massachusetts tax rules for home workers are nearly identical to the IRS's, and both treat full-time and part-time home workers the same.
