The other day I read an article on MSN about why we should buy a home. (Home, the mother of all tax shelters)
At the end of the article it brought out a fantastic point that every realtor & mortgage EVERYONE should know!! It is that the IRS has changed the rules & the rules make it advantageous for all of us to utilize our homes as home offices. The benefits are HUGE. Here's some of the info from the article:
Here's where, in my opinion, the IRS actually crossed the line. But since it was in favor of the taxpayer, I'm not going to complain.
Let's say you use 20% of your house as a home office and you deduct depreciation and expenses for working in that part of the house.In the past, when you sold your house, 20% of the gain wouldn't qualify for the exclusion because that 20% wasn't used as a "residence." It was used exclusively as your office.
Now, the IRS doesn't care even if you used your home 90% for business as a home office. You can now exclude as much as 100% of your gain, up to the $250,000/$500,000 limit.
You're going to be subject to tax only on the gain to the extent of depreciation taken on the building since May 7, 1997. But that's taxed only at a rate no more than 25%.
Wow! That means, if you qualify, there's no reason not to claim a home office. And I know there are any numbers of people who work out of their homes who don't claim home offices now.
Dorothy was right: "There's no place like home." At least for now.
- A free piece of Schnepper advice: You should check IRS Publication 587(.pdf download) on home-office deductions. Also, check Publication 523, "Selling your home."
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