Plenty of eBay business owners do not take a home office deduction, because they believe it will trigger an audit. The IRS insists that such belief is misguided, but it never hurts to be cautious. Follow these tips to maximize your home office deduction — and minimize your chances of losing an audit.
Devote a separate room exclusively to your eBay business. While you may claim a home office deduction even if you use only a portion of a room for work, designating an entire room to your work is much easier for deduction purposes: The math is easier, you won’t have to worry about physically separating your work from your personal space, and you’ll have an easier time satisfying the IRS that you use your office exclusively for your business.
Figure out which method yields the highest deduction. Of course it’s easier to simply count rooms, but also take the time to measure the square footage devoted to your workspace. Depending on your home’s layout, the square footage method may result in a higher deduction.
Create visual aids. Take a picture of your home office, and draw up a simple diagram of your home’s layout showing the space used for business. This evidence can help prove, if ever necessary, that you applied the correct percentage when calculating what portion of your home is used for work.
Keep a record of eBay home office activities. If clients or customers visit, ask them to sign a log book. Note the time you spend on business in a datebook or calendar.
Use your eBay home office as your business address. It will be easier to prove that your home is your principal place of business if you designate it as such. As long as you are comfortable with privacy issues — your address may become publicly available — have business mail delivered there and put your address on business correspondence, cards, and your letterhead.
Save those eBay business receipts (and other records). When you take the home office deduction, you can claim other expenses that you might not think of as business-related, such as a portion of your rent, utility payments, or house-cleaning fees. Remember that you’ll have to save bills and receipts for these expenses along with your other business records.
For more information, see this article on home office deductions.