AboutCarole Dunton Expertise Preparation of individual income tax returns including social security, pensions, lump sum distributions, sale of personal residence, stock and mutual fund sales, distributions from individual retirement accounts, moving expenses and itemized deductions.
General knowledge of schedule C for small sole proprietorships.
No experience in corporate, estate, partnership or large business returns.
Experience 9 years as tax preparer for major national firm.
Question We've been using one large room of our home as the business office (and only office) for my wife's 501(3)c non-profit organization, and have difficulty interpreting the IRS rules for claiming this as a deduction. We seem to meet the basic requirements that the room is used solely for that purpose, but that's where they lose us. Is there a simple way to figure out what our deduction would be? Thanks for any help you can offer.
Answer Hi Bob,
You need the sqare footage of the room and the square footage of the entire house to begin with. Then you list the direct and indirect expenses of that room.
For example the mortgage interest, taxes and utilities are indirect expenses so only the portion of those expenses that apply to that room are deductible.
Let's say that the square footage of the house is 1200 and the square footage of the room is 120, then 10% of the indirect expenses are deductible for the home office. If you painted that room it would be a direct expense and fully deductible.
Office furniture and computer equipment should be depreciated since they have a useful life of more than one year.
You can also take a depreciation deduction on the house based on the same percentage that that room is of the whole house. Don't include the land in the depreciation calculation.
One of the tax prep software packages would probably make the calculations easier. I haven't used any of them so I don't know which one is best but Turbo Tax and Tax Cut are very popular.
