Using Your Home as a Tax Break
If you were paid while running your own business, you can deduct expenses related to using a workspace in your home as an office. Keep in mind that your workspace can only be used for business.
You can take the home office deduction if you use your home as your main place of business, or if you use it to meet people while you do business. There's two different ways to claim home office expenses, so you can figure out which one gives you the most benefit.
First, take the area of your workspace and multiply it by five dollars ($5). This way the maximum you can take is $1,500 (300 square feet times $5). The actual expenses for using your home office would be itemized. However, you can't include depreciation, and you CAN'T carryover the overage of home office expenses to later years.
Second, total up your home expenses. That includes rent, utilities, renter's insurance, mortgage interest, repairs and maintenance, homeowner's insurance, depreciation, property taxes, and losses due to damage, destruction or theft.
Then take all of those expenses and times it by the area of your workspace compared to your total living space. This way you CAN carryover the overage of home office expenses to later years.
Compare your net profit from your business against the allowable home office deduction.
If the net profit is more than the home office deduction, you can't claim the home office deduction on that year's tax return.
If the net profit is less than the home office deduction, then you can claim the home office deduction on that year's tax return.