Adding an office

[James H.]

Hi,

Last September I built an addition onto my house that includes an office that I use for work 10-20 hours/week. Now tax season is upon me, and I'm very confused about my situation. Has anyone here built an office onto your house? I think there may be deductions that I'm now eligible for. I'm just not sure where to start. Did I mention that I'm not very good with taxes?

Also, can anyone recommend a good tax website that allows e-filing and can handle more complicated returns?

TIA!!! James

p.s. I'm aware of misc.taxes, and I will ask there too. From what I can tell, that group is knowledgeable about general situations, but can't usually help with specific ones. That's why I posted here first. Sorry if anyone finds it off-topic!

[Andy Hill]

There are deductions you can take for a home office, but unless you use that space *exclusively* for a home office (among other requirements), you'll probably have the whole schmoo disallowed if you ever get audited. And a home office deduction is a prime audit trigger.

[Nehmo Sergheyev]

- James H -

- Nehmo -

what it says it does. You could also use TurboTax and do it yourself. You can get a copy via eMule or

- James H -

- Nehmo - You could have crossposted. Does Verizon allow that? AOL didn't (and might still not) a while ago.

- James H -

- Nehmo - Not really true. It's a good NG for any kind of tax question.

[DaveG]

You may want to contact a tax pro. This area of the tax code can be very tricky, and as another poster mentioned, any home office tax deductions are likely to subject you to an audit.

[William Morris]

Hire a professional accountant - the area that you're getting into is a real rat's nest of legalities, many of which can play to your advantage. I own two businesses and am partnered in a third, and my accountant has, so to speak, saved my cookies on more than one occasion.

- Wm

[rck]

The wording by the IRS is that the space must be used "regularly and exclusively", that is to say used solely for business and nothing else. Generally the deduction is proportional to the square footage of the entire home, although there are limits based on your total taxable income from all sources. If you shared the space with home activities such as I did last year, there is no home business deduction whatsoever. The space must be used exclusively for business and nothing else on a regular basis. Both Tax Cut ($19.95 downloaded) or Turbo Tax at $59.95 will do an acceptable job complete with e-filing. I'm not familiar with other software, although I understand there are many other good programs out there. See Publication 587 at

If you are uneasy about it, see a tax pro. If it is new construction, you may be able to depreciate part of the construction cost but that can be a can of worms if you sell. Then you are selling your home and selling business property. My opinion, it's not worth it for a 20 hour a week business.

Bob

[Dan Hartung]

This used to be a thorny section of the tax code, but then a tax court ruled that the traditional deduction was broadly invalid -- so Congress changed the law to make it official. There's now an actual form you can use which flows to Schedule A, Form 8829. You enter the expenses for your home (utilities, etc.), define the office as a percentage, pro-rate the expenses, and that is your deduction. (Of course, you must also itemize and have sufficient Schedule A deductions to make it worthwhile, but homeowners almost always qualify.) You probably also need to do a

4562 to depreciate the value of your home.

to all certified providers. But if your return is complicated you're probably better off using TurboTax rather than working online (which is best for simple, standard returns such as the 1040EZ.)

No crosspost?

Well, I don't know that we can be of any more help. But ultimately these are complicated questions and you should consult a tax professional as well as run specific questions past the IRS. (If the IRS tells you to do it, you can be off the hook for certain penalties.)

[Jamie Finn]

I doubt you can deduct anything this year, since you've only been using it since Nov. and don't use it as your principal place of business. You should look around on irs.gov for details just in case, though. As for tax sites, I'm a recent convert to TaxBrain.com. This was my first year using it, and I was blown away by how simple it made everything. My tax situation is kinda complicated too, but I still had no problems figuring it all out. Good luck!