Working at home offers more advantages than just being able to work in your pajamas and not having to brave the cold and the traffic to get to work. Working at home also offers a myriad of tax deductions. Below are just a few:
1. Home office deduction
This is the most generous of the IRS work-at-home deductions, but this one is tricky. To qualify, you need to work at home for your employer’s (that’s you if you’re self-employed) convenience, not just your own. In addition, you need to set aside a designated room (or portion of a room) and use it exclusively for work.
Supplies, such as paper, pencils, pens and printer ribbons are deductible as long as they are not reimbursed by an employer.
3. Internet and phone
Your phone and Internet expenses are also deductible, if these items are used primarily for business. For instance, you need a second phone line to be able to deduct your telephone expense.
If you take continuing education or degree classes in your field, you can deduct the cost as a business expense.
Travel for business is also deductible. Items like plane tickets, hotel accommodations and parking come directly off of your income. Day trips, too, can help your tax bill. You can deduct a per mile expense if you keep a log of your mileage.
6. Office equipment
You obviously need a computer, printer and other office gadgets to being able to work at home. For larger items, the IRS gives you the option to either take a one-time deduction of the purchase price or spread the expense out over the life of the equipment.
Business software, like QuickBooks, AbobePrintshop and the like are also deductible if you use them for work.
8. Trade publications
Do you subscribe to any trade magazines or newspapers? Make sure to deduct the cost of them when you calculate your income tax.
9. Business gifts
It’s nice to give small gifts to your clients or to the people you’ve worked with over the year. Such gifts are deductible.
10. Outside contractors’ fees
If you’re self-employed, there are likely some occasions when you need help with a project that’s veered out of your level of expertise. For example, if you’re a freelance writer, you may, on occasion, need a photographer or a graphic designer. The fees you pay these people are deductible as business expenses.
11. Retirement contributions
Like office workers, you can deduct your contributions to IRA and SEP IRA and solo 401k accounts dollar for dollar. This money isn’t taxed until you withdraw it from the account.
12. Bank and payment aggregator fees
Do you use a service like Paypal or Bill.com to bill and collect from clients? The fees such services and banks charge these transfers are deductible.
You’ll need a desk and a place to sit to work at home. The IRS realizes this and allows you to deduct the cost. Like office equipment, you can either take a one-time deduction or spread it out over the life of the furniture.