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Answers to Your Tax Questions


By Wayne M. Davies
Contributing Writer
Article Date: 03.11.03


Wayne,

I own a sole proprietorship web-based business and I recently bought a new house. I utilize 13.5% of the living space as a home office. What can I write-off from the list below since I utilize 13.5% of the living space as a home office:

1. Monthly mortgage

2. Annual home-owners insurance

3. All costs associated with purchasing the house (points paid, closing costs, escrow fees, lender fees, etc)

4. Repairs that I constantly make around the house

Thanks,
Mark

Hi Mark,

Since your first name is the same as my middle name, I'm more than happy to answer your question.

Assuming you qualify for the home office deduction, you can deduct 13.5% of the following home-related expenses:

1. Interest portion of the mortgage payments (but not the principal portion)
2. Property taxes
3. Homeowner's insurance
4. Utilities
5. Repairs & maintenance
6. Depreciation of the purchase price

Use Form 8829 to calculate the deduction, then transfer the total expense amount to Schedule C, Line 30.

The home office deduction has gotten a lot of attention over the years. There are several requirements that must be met to claim this deduction. I'm not trying to scare you away, just making you aware that you should do your homework. Or consult a tax professional, of course.

Form 8829 is not for the numerically-challenged. I strongly recommend you do a little research on this. Read the form instructions carefully; IRS Publication 587 is also helpful.

Sincerely,
Wayne


About the Author:
Wayne M. Davies is author of the new eBook, "The Tax Reduction Toolkit: 29 Little-Known Legal Loopholes That Will Reduce Your Taxes By Thousands (For Small Business Owners and Self-Employed People Only!) Don't file another tax return until you visit: http://www.YouSaveOnTaxes.com/toolkit.html



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