Expert: Anastacia Brice - 11/3/2009

Question
My wife and I have stated a non-profit org and we want to start with an office area in our house. We plan, in the future, to move to an outside office.  We have a small house with 2 small kids.  Can we set aside a workspace area and still deduct expenses (utilities, taxes, etc.) based on the square footage of the workspace against the total footage of the house?  We plan to use a corner of the den (with desk, fax, printer, computer and phone) as the workspace/office.  Is that allowed?  Also, we plan to get a second phone line installed for the business.  But could we still use the internet service coming into the house for the business and deduct a portion of the monthly cost for the business or would I need to get a totally different internet service account?


Answer
Hi, Carl :)

You can absolutely take the home office deduction despite the fact that the space isn't an entire room.

The question (and only an accountant can really answer this, based on your specific circumstances, so you'll want to consult one before tax time next year) is really whether it's smart for you to.

If you take the deduction now, when you sell your house (and I'm assuming you own or are buying this house)you'll have to pay it all back in capital gains tax. That sounds ominous, but in reality, in some cases, it's actually worth taking a deduction now and dealing with that later.

If you choose not to do that, the accountant will probably advise you to also not deduct a part of anything you share with your personal space (like the Internet service). But ask him or her about that, too!

Good luck with your work!

Warmly,
Stacy