Whether You Rent or Own: Home-based Office May Save You Money

There are many financial advantages to home ownership in the United States as the result of tax breaks available under the Internal Revenue Code.  Interestingly, one may also benefit from a home-based office whether a homeowner or rental tenant.

Whether You Rent or Own: Home-based Office May Save You Money

Today, so many are self-employed and work from our residence instead of paying rent for office space outside of our homes.  A consultation with a Certified Public Accountant to discuss your income, expenses and tax bracket, may result in some tax savings in the event you work from your residence.  It is critical to consult with a licensed, Certified Public Accountant when exploring detailed tax information.  Tax advice on the Internet may not take into consideration all tax rules that apply or may not apply to your individual situation.

In the event your tax professional concludes that you are eligible for the Home-based Office tax deduction, there are formulas that will be applied based on the square footage of the space that is reserved specifically for the home office in your residence.  Calculations may then be performed, based on the square footage, to determine the amount of certain expenses you pay for your residence that may be tax deductible.  A percentage of those expenses may be deductible from your total tax liability for that tax year.

For example, if the square footage of your home-based office is 25% of your total living space in your residence, it may be possible, if your tax professional advises, that 25% of your costs may be deductible.  A percentage of monthly costs for electricity, heat oil, water and some maintenance items may be tax deductible and thereby, reduce your income tax liability.

This potential tax savings is available to rental tenants as well as homeowners.  When you are considering a home purchase or renting an apartment, you may want to be sure to select a home that has that additional bedroom or unfinished basement or garage that may become your future home-based office.

It is wise to consult with tax professionals when considering a real estate purchase.  Real estate ownership provides one of the most positive tax advantage strategies for those at any socio-economic level.  In fact, many have increased their personal net worth and become wealthy in the United States as the result of the beneficial tax rules when applied to strategic real estate purchases.

DISCLAIMER:  This article is for educational purposes only.  The information herein is not meant as real estate or tax advice.  All readers are advised to seek counsel of licensed professionals such as real estate brokers, attorneys, accountants, insurance professionals and financial planners for consultation about their particular situation.  

This article, Whether You Rent or Own:  Home-based Office May Save You Money, was written by R. Jamila Harris, Broker Realtor and Member of the National Association of Realtors, U.S. Virgin Islands. © Copyright 2014 R. Jamila Harris. All Rights Reserved