Smiling blonde woman at desk with computer

Setting Up Your Home Office

Home Office Setup

Setting up a home-based business will undoubtedly cost you some money. There may be times when you’re not able to locate a receipt. In these circumstances you are advised to underestimate the value of the item in order to keep yourself in good standing with IRS in the event of an audit.

An expense like the cost of a personal computer can usually be a tax deductible item. You should be able to prove that you do use your home office or computer regularly for business so the costs qualify as a tax deduction. The majority of your work should be done from the home office; however, some work can happen outside of it.

A good tax advantage that a home business has over a traditional business is that driving expenditures can be deducted. You will be able to deduct driving expenses for business related purposes. Wise business owners will coincide personal errands around driving to business related tasks.

An example of this might be when going to collect the contents of a P.O. Box the home business owner can deduct those motoring expenses, it does not matter that you completed a few personal chores along the way!

Mileage must be recorded for all motoring, regardless of the method used. Standard Mileage rates are set by the IRS.

Londonderry tax preparation accountants advise you that the IRS state the following are allowable tax-deductible motoring expenditure items.

  • Oil and gas expenditure
  • Garage and parking costs
  • Auto repair and depreciation costs
  • Registration and license costs
  • Insurance and leasing payment costs
  • Toll costs
  • Motor vehicle insurance

For non-car owners still needing to travel for the home business, you are able to deduct items like bus and taxicab fares. Traveling by plane or train can also be deducted as can food, dry cleaning, phone calls and hotel bills. Should you need to ship material associated with a business presentation then this too is tax deductible. Business-related meals for travel are limited to 50% of total cost. As of 2017, meals and entertainment of client are no longer deductible.

Some other expenditure that you’ll be able to deduct is in the list below:

  • Medical insurance
  • Credit expense costs
  • Bad debts
  • Disaster Insurance
  • Theft Insurance and malpractice
  • Medical expenses
  • Out of pocket expenses

One area to be aware of is using a home phone, that isn’t deductible as it has a personal use element. A dedicated business phone would be deductible.

Office equipment items that can be deducted if they are for use in your home business are:

  • Computer
  • Laptop
  • Printer
  • Copier
  • Fax
  • Scanner
  • Camera
  • Calculator
  • Sundry office items

Many types of office equipment will fall into the tax deductible category, such as desks, office chairs, filing cabinets, lamps and similar items. As long as these items are used for the home business then they are allowed.

To round of the types of deductible expenditure are stationary type items, for instance tape, paper, pens, folders, files, calendars, planners and other sundry items.

There you have a fairly comprehensive overview of some of the allowable tax deductible expenditure. Your local Londonderry tax preparation accountant will be glad to advise you on further tax-deductible items that fall outside of the scope of this article.