Thanks to the convenience of the web, more and more small business owners are finding it easy to work from home offices. As you may know, small business owners can take advantage of a set of tax deductions relating to business expenses. However, when it comes to making deductions for expenses relating to your home office, things can get tricky. The deductions are definitely available, but you may have to take certain steps to make sure that you can get them legally.

A space devoted to work
First of all, in order to be able to claim deductions for many aspects of your this type of office, you need to have a space that is devoted exclusively to your business. And when the tax code says exclusively, the IRS really means it. If your office at home doubles as a living room, dining room, or bedroom, or if it is used for sleeping, watching TV, or anything else, then it does not qualify for deductions.

Of course, getting over this hurdle is not difficult. Even if you place your office in a room that is devoted to other purposes, you can set aside a square of space that is exclusively for work. Once you do so, you’ll want to measure out the dimensions of your work area so that you can properly claim your deductions.

Your principle place of business
Second, it’s important that your office at home serve as your principle place of business. If you use your home office for a few occasional tasks to supplement your primary work, which is out of the home, then you don’t qualify for deductions. However, if your home office is the place from which all your business activities are based, then you do qualify. This is simple for a lot of people, but if you have an external office, things can get complicated.

Deductions
So, now that we’ve established which home offices are eligible for deductions, what can you deduct?

· All expenses relating directly to your home office: This includes expenses relating to painting, cleaning, remodeling, etc.

· Electric and phone bills for your home office: If you use your phone for non-business purposes, then it doesn’t qualify. With your electricity, calculate the percentage of your home’s square footage that your office takes up, calculate that percentage of your monthly bill, add it up for the year, and deduct that amount.

· Rent or house payments: As with the electric bill, you’ll need to know the percentage of your home’s space that your office takes up. Apply that ratio to your rent or house payments, and deduct that much for the year. If there are any rooms that are primarily used in relation to your home office (for example, an adjacent bathroom or a closet), don’t forget to enter these into the calculations.

· Fees relating to your business: Depending upon what type of business you’re involved in, you may have to pay fees to various entities. For example, if you’re a freelancer, you may have to pay fees to the service that connects you to clients. These can be deducted.

First, determine if you qualify for a home business tax deduction. A home office is generally defined as a place where you meet with clients, patients, or customers. Or if this part of the house is used exclusively for business purposes. Most people have a general image that comes to mind when they hear the words “home office”. In reality, tax deductions can apply to a variety of places. Your home office can be a garage, basement, or a studio. If you do qualify as a home business, it is crucial to keep all records, receipts, and paperwork that you have accumulated throughout the year.

It will make tax time a much less stressful experience for the home business owner. Do not overlook the small things. This can be as simple as keeping the receipts when you purchase paper, staples, or toner. Any item that is purchased for your home business is usually considered a tax deduction. This may seem tedious and unimportant but nothing could be further from the truth. You might be amazed when all these little things add up at the end of the year.

Home business deductions can be separated into two categories. The first is for Direct Expenses. These are expenses that are needed for your actual home office. Direct expenses include office furniture, decorating costs, or equipment. Indirect Expenses are the expenses that must be paid the entire house. This includes heating, electricity, or mortgage interest payments. You can deduct the percentage of your business expenses from your utility costs. Another tax deduction to consider is telephone expenses. If you have one telephone line, the IRS is usually not going to believe that you use this only for your home business. The second phone line installed in your home is purely one hundred percent deductible. Another common deduction that is often missed is the lost distance charges incurred because of business calls.

Most home business owners use a vehicle as a means of transportation for their business. This vehicle can be used for running to the post office, or meeting with a client. Keep a log book in the vehicle to keep track of the mileage on these errands. Vehicles can be vital to run your home business, and overtime these kinds of charges can hurt your profits. There are many valuable tax deductions for vehicles, such as car repairs and car insurance. Airline fare can be another costly, but necessary aspect for home business owners. The IRS does allow your trip expense as another tax deduction.