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If you work from home for your own business, you can deduct various things including a fraction of your utility bills, a fraction of your rent or mortgage payments, etc. Based on the fraction of the square footage of the home used *solely* for business purposes. This deduction can be taken in full without regard to your adjusted gross income (AGI). However, if you are working from home for an employer, the situation these deductions are for unreimbursed employee expenses, which are limited to whatever exceeds 2% of your AGI.
From irs.gov/publications/p529/ar02.html you can see the allowed deductions and limitations in this regard: - quote - Deductions subject to the 2% limit are discussed in the following three categories. * Unreimbursed employee expenses (Schedule A (Form 1040), line 21 or Schedule A (Form 1040NR), line 9). * Tax preparation fees (Schedule A (Form 1040), line 22 or Schedule A (Form 1040NR), line 10).
* Other expenses (Schedule A (Form 1040), line 23 or Schedule A (Form 1040NR), line 11). Unreimbursed Employee Expenses Generally, the following expenses are deducted on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 9. You can deduct only unreimbursed employee expenses that are: * Paid or incurred during your tax year, * For carrying on your trade or business of being an employee, and * Ordinary and necessary.
An expense is ordinary if it is common and accepted in your trade, business, or profession. An expense is necessary if it is appropriate and helpful to your business.An expense does not have to be required to be considered necessary. You may be able to deduct the following items as unreimbursed employee expenses.
* Business bad debt of an employee. * Business liability insurance premiums. * Damages paid to a former employer for breach of an employment contract.
* Depreciation on a computer or cell phone your employer requires you to use in your work. * Dues to a chamber of commerce if membership helps you do your job. * Dues to professional societies.
* Educator expenses that are more than you can deduct as an adjustment to income. * Home office or part of your home used regularly and exclusively in your work. * Job search expenses in your present occupation.
* Laboratory breakage fees. * Legal fees related to your job. * Licenses and regulatory fees.
* Malpractice insurance premiums. * Medical examinations required by an employer. * Occupational taxes.
* Passport for a business trip. * Repayment of an income aid payment received under an employer's plan. * Research expenses of a college professor.
* Rural mail carriers' vehicle expenses. * Subscriptions to professional journals and trade magazines related to your work. * Tools and supplies used in your work.
* Travel, transportation, meals, entertainment, gifts, and local lodging related to your work. * Union dues and expenses. * Work clothes and uniforms if required and not suitable for everyday use.
* Work-related education. - end quote - Disclaimer: This answer is informational only and is not intended as tax advice. You should seek out professional tax advice from e.g. A CPA before making tax-related decisions.
Basically, you should be allowed deductions based on home much space you use and how much time you spend working in it. It's usually pro-rated per the square footage of your house and the square footage of the office space. The deductions includes utility bills.
You can't include your telephone bill, but those expenses do go into the business expenses section of your tax return. There are a lot of variables, so you need to get with your tax preparer to find out exactly what sort of business deductions you're allowed in your particular situation. Usually for people who work from home instead of heading to the office, business expense deductions must have been incurred for the convenience of the employer.
Here is a link that gives some general guidelines.
Premiums.) In column (a), enter the expenses that benefit only the business part of your home (direct expenses). (b), enter the expenses that benefit the entire home (indirect expenses). Percentage (line 3) and enter this amount on line 21.
Your 2011 worksheet on line 22. On lines 25 through 30, figure your limit on deductions for excess casualty losses and depreciation. Casualty losses that would not be allowable if you did not use your home for business (i.e.
Of the amount on line 5). On line 27, enter the depreciation deduction from Part 3. Line 41 of your 2011 worksheet.
On lines 29 and 30, figure your allowable excess casualty losses and depreciation. On line 31, total all allowable business use of the home deductions. On line 32, enter the total of the casualty losses shown on lines 10 and 30.
27 of Form 4684, Section B and enter “See Form 4684” above line 27.
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