If you’re self-employed and use a portion of your home regularly and exclusively for the record keeping and management of functions of your business, and you have no other location where you regularly perform such functions, you may qualify for a home-office deduction. To claim the home office deduction, you complete and file Form 8829 and base your deductions on the square footage used for business compared to the total square footage in your house. You can deduct the cost of your office furniture only if it is used for business 100 percent of the time. If you have a separate business account at the bank, you can deduct bank fees as well. If you have a business credit card and don’t pay off the entire balance every month, you may deduct 100 percent of the interest for business expenses. If you have children under 18 years old who work for your business, you can pay them up to $4,250 a year tax free.
Whether a business can take a home-office deduction or not, a home-based business can still use the regular business expenses write-offs. These deductions including anything that is “ordinary and necessary” in terms of the expenses that are applied to the operation of the business. For instance, if you drive a lot out of your home-based business, the car being used and the amount of miles being driven (including gas) can be used as business deductions. Also, office supplies used in the operation of the business, ranging from desks to paper to the computers themselves, are all eligible to be used as deductions. You can also deduct parts of your internet access bill and utilities. You may also be eligible to deduct a significant part of your expenses, such as insurance, depreciation, repairs and utilities, for that part of your home. Most normal business expenses that you would incur whether or not you were working from home such as postage, office supplies, advertising, wages, etc. are treated the same way as any other business. You can deduct those expenses as part of your regular deductions for the cost of doing business.
In order to use any of these deductions, you must keep detailed records. This way when problems arise, you have proof to verify your transactions. Do not overlook the smaller items, including mileage when you go to the office supply store. People often overlook the dollar spent here and there, yet at the end of the year, these dollars can add up to hundreds of dollars in deductions.
For more information on tax deductions, visit the official US IRS website