| Economic recession has forced many people who | | | | qualify for a home business tax deduction. As with |
| have been laid off to go in business for themselves. If | | | | every deduction listed in the Internal Revenue Code, |
| you have recently started a home based business | | | | there is a deduction limitation for home based |
| then you might not be aware of tax deductions that | | | | businesses. Your business deductions are limited to the |
| apply to you. It doesn't really matter where you work | | | | percentage of your home used for business. For e.g. If |
| from, IRS says that a business that operates in an | | | | you use one room in your 2 bedroom apartment, the |
| apartment, house, condominium, mobile home, or boat | | | | business use of your home is 50%. |
| can qualify for a home based business deduction. | | | | There are few misconceptions about home business |
| There are certain requirements that a home based | | | | deductions that are floating around. The most common |
| business should meet. | | | | one is: |
| - You should dedicate a part of the home exclusively | | | | - Non-deductible personal living expenses can be |
| as a place of business. | | | | deducted as business expenses. |
| - The part of the home has to be identifiable. | | | | Not true, IRS says that non-deductible living expenses |
| - You should be using your home for business | | | | are never deductible. For e.g. If you have a coffee in |
| regularly. | | | | your room that you primarily as business. It is always a |
| - You should be meeting your clients in that part of the | | | | good idea to save all your receipts and bills for at least |
| house. | | | | 5 years. Home based businesses have a higher |
| - You can have other places of business but your | | | | probability of being selected for an audit and you |
| house should be the primary place. | | | | should always be able to substantiate your claims. |
| If you are following the above requirements, you | | | | |