What can I deduct from my taxes as a home-based business? You cannot take the home office deduction if you simply work from home as an employee of a business. There are exceptions to the 'exclusive use' test, including businesses that store inventory or product samples or use their home as a daycare facility.Īdditionally, you must be a registered business owner or independent contractor to take the home office deduction. However, a bedroom or living room where you work on business tasks cannot be claimed, because you use those spaces for other personal purposes. The IRS refers to this as the “exclusive use” test.įor instance, a spare room in your home that is only used as your business office can be claimed for the home office deduction. If you do not have a dedicated space for business in your home, you are not allowed to take the home office deduction. Here’s how your home business can leverage certain tax deductions that may save you money in the long run.īroadly speaking, you must be able to show that a portion of your home is your principal place of business, and that this space is regularly and exclusively used for conducting business. Home businesses can also be subject to tax deductions that make the process a little easier. The low startup cost of building a business at home provides an opportunity for people to supplement their income, monetize their hobbies, or even make their dream jobs come true. Running a home-based business can offer tax deductions on home repairs in addition to typical business expenses.

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