Small Business Tax FAQ

Questions:

• What is -- and isn't -- a tax deductible business expense?
• If I use my car for business, how much of that expense can I write off?
• Can I claim a deduction for business-related entertainment?
• What is the difference between current and capital expenses?
• If I buy a new computer this year, do I have to deduct the cost over a five-year period?
• I am planning a trip to a trade show. Can I take my family along for a vacation and still deduct the expenses?
• I work in my home part time. Can I take the home office tax deduction?
• I want to start my own small business. What do I have to do to keep out of trouble with the IRS?
• Does incorporating a small business start-up offer tax breaks?
• Is it safe and sensible for me to keep my own books and file my own tax returns?
• I am hiring people to help out with a big job coming up. Are they considered independent contractors or new employees?

Answer:

I work in my home part time. Can I take the home office tax deduction?

If you run a business out of your home, you may be able to take the home office deduction. This allows you to deduct a portion of your rent or mortgage costs, as well as some related costs -- such as utilities, insurance, and remodeling. However, there are strict requirements you must meet. For instance, you will not qualify if you use your office partly for work and partly for personal reasons, or if you don't use the space regularly for business.

For more information, see Nolo's article The Home Office Tax Deduction or check with a tax professional.