Use your Home Office as a Tax Deduction in 2009

There are certain requirements but if you work from home and have an office in the home, you can deduct the space along with your other business expenses on your 2008 tax filing. There are types of use needed to be able to take this very helpful business deduction. First, you use the space exclusively and regularly for your business. Or two, you use the space as storage for business inventory on a regular basis.

Deduction Computation and Reporting

The deduction is a percentage of your overall home expenses based on the square footage of the office divided by the total square footage of your home. If you operate your business with a loss than your expenses will be limited. To report the tax deduction complete form 8829 and transfer the deduction to your Schedule C line 30.

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You probably know about taking deductions to reduce your tax liability. To be clear, deductions are not the same as tax credits – deductions are applied to your earned income before calculating taxes, and thus reduce the amount on which you are taxed. Tax credits are more valuable, and are a direct credit towards the tax that is due.

When you do your taxes each year, you can either take a standard deduction, or you can keep a record of tax deductible expenses and choose to use that if it is greater. For 2008 the standard deduction is $5450, or $10,900 if married filing jointly.

It seems that many people I speak to have not heard that this year you can claim at least some of your property taxes as a deduction, even if you do not itemize your expenses. The law allows you to add your real estate taxes to the standard deduction.

There is a limit of $500, or $1000 for joint filers, so it can save you paying taxes on $1000 of your income. This is all part of the plan to stimulate the housing market.

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• Use your Home Office as a Tax Deduction in 2009