Frequently Asked Questions About Home Office Deduction for Businesses in Dallas
With the COVID-19 pandemic causing lockdowns of physical business locations, many workers and employers have had to shift operations to home offices3 min read
With the COVID-19 pandemic causing lockdowns of physical business locations, many workers and employers have had to shift operations to home offices. Home offices are now considered the new norm and those who are self-employed or own businesses may be looking to take advantage of home office deductions come tax season. Before submitting your taxes, it’s essential to understand the current tax laws concerning home office deductions and what these mean from a local vantage point of Dallas. UpCounsel, a network of experienced lawyers, can provide you with the answer to frequently asked questions on deduction for those living and working in the Dallas area.
The federal government allows businesses to deduct a portion of the cost of rent, utilities, insurance, repairs, and other expenses related to one’s home office as long as it’s the primary place they conduct business. This portion of the deduction is often equal to the percentage of the home that is used exclusively for work or business. The Internal Revenue Service (IRS) insists that in order to qualify as a “primary workplace” the space must be used exclusively and regularly for administrative and business operations.
To qualify for a home office deduction, taxpayers in Dallas must meet several criteria. The home office must be used exclusively for business purposes – meaning it is not used for any other purpose aside from business operations. Additionally, the room must also be used on a regular basis; if it is only used occasionally, then a business-use-of-home deduction is not available. Another cogent detail is that the home office must additionally act as the primary base for those conducting business operations. If business activities happen in more than one location, then those conducting business must prove that their home office is their “primary place of business.”
Some other important details in terms of filing home office deductions involve needing to fill out Form 8829. This is an expense form which helps to track the income from a home business as well as the expenses associated with running a business from home such as rent, utilities, internet, repair, depreciation, etc. It should be noted that a full deduction can only be taken if the total cost of running the business out of one’s home is equal to or more than the total business income.
In addition, one’s local state regulations may also impact the amount of deduction one may take. For example, in Dallas, the state of Texas offers an income tax deduction for companies who use home offices as their primary place of business. The funds are outlined by the Texas Business and Commerce Code Sec. 22.202 and allow for taxpayers to reduce the gross income of their business-use-of-home properties and services.
Quarterly estimated estimated taxes may also be required in Dallas when one has a business that is self-employed or that primarily works out of a home office. These taxes are estimated tax the taxpayer pays in four equal installments throughout the course of the year, based on the income earned by the business.
For business owners based in the Dallas-Fort Worth area, it’s important to be aware of the nuances and regulations surrounding a home office. UpCounsel offers comprehensive resources to individuals and small business owners in order to guide them through the process of filing taxes related to their home offices. From business lawyers with 14 years of experience to the option to engage a freelance legal department, UpCounsel has you covered when it comes to any special tax needs and expenses related to running a business from a home office in Dallas.