Top 5 Things to Consider When Claiming Home Office Deduction in New York
Are you an executive who works out of their home office in New York3 min read
Are you an executive who works out of their home office in New York? Do you have to pay taxes on the home office deduction? Well, you're in luck because there are still many opportunities for New York based businesses to deduct home office expenses. However, understanding the rules of claiming the deduction can seem confusing. In short, if you can meet the qualifications, you can deduct a portion of your home office expenses, such as electricity and internet, from your business taxes.
That's why it's important to take the time to educate yourself about the home office deduction regulations in New York. To help, we've created this helpful guide on the top five things to consider when claiming the home office deduction in New York State.
1. Is the Space in Your Home Reasonable?
The home office deduction is only available for businesses in which the owner uses a portion of their home exclusively for their business operations. To qualify for the deduction in New York, the office must:
• Not exceed 600 square feet
• Be marked off by walls, doors, or curtains
• Be used regularly and exclusively for business nearly all the time
• Not be a multipurpose room (i.e. a living room cannot be used as a home office)
2. What Expenses Can You Deduct?
You can deduct all of the direct expenses associated with running your home office, such as:
• Property taxes
• Mortgage interest
You can also deduct indirect expenses such as a percentage of your home's overall utilities, repairs, mortgage interest, and insurance.
3. How Much Can You Deduct?
The amount you can deduct from your taxes depends on the percentage of your home office space. For example, if you have an office that is 600 square feet, you can deduct up to 100% of the expenses associated with it. However, you can only deduct up to the Bona Fide Profit (aka your business’s net income).
4. Do You Meet the Record Keeping Requirements?
When claiming a home office deduction in New York, it's imperative that you also keep detailed records. This includes records such as invoices, receipts, checks, and anything related to the expenses you're claiming on your taxes. Keep all comprehensive records for at least three years in case of an audit.
5. Do You Have the Professional Help You Need?
Before claiming a home office deduction, it's always best to speak with a qualified attorney. This will ensure you follow the laws and don't have any issues when filing taxes. An experienced lawyer is necessary to accurately account for all the legal aspects that go into claiming a home office deduction in New York.
Additionally, you'll want to enlist the help of an experienced accountant. This will help you determine which expenses you can claim on your taxes and ensure that you don't have any potential issues with the IRS.
The home office deduction provides many great benefits to New York entrepreneurs. While it's not overly complicated to claim, understanding the details of the law is important to ensure you don't run into any issues with the IRS. Hopefully, this guide has provided some helpful insight on the key things to consider when claiming the home office deduction in New York.