Business Deduction – Home Based Business
| Posted by: Hwesu | No Comments
For home based businesses, the primary residence usually serves a dual purpose as the home for the owner and the principal place of business. The home also represents the largest cash deduction for the homeowner and potentially the largest expense for the same business owner, In order to claim the rent or mortgage paid, the following criteria must be considered when determining tax deduction for the business:
- You are engaged in business to earn a profit. You are not required to earn a profit but the intent of the business is to become profitable.
- You must show that you use your house/apartment/condo as your primary or principal place of business.
- You can also deduct the expenses paid for meeting spaces (community rooms; restaurant meeting rooms; co-op business locations) even if the locations are not your principal place of business if the locations are used to meet patients, clients, or customers.
- The taxpayer must determine the place of business in the home and the percentage of the area as compared to the total square footage of the home.
These rules set forth by the Internal Revenue Services (IRS) for calculating the home based business deduction.