While many people may worry this time of year about deducting too much on their tax returns, small business owners may not be deducting enough.
Specifically, these business owners often sell themselves short by failing to claim their home offices, a new study shows. Research has found that just 3.4 million of the 14.6 million U.S. small business owners who have home offices deduct the cost. Personal finance expert Jane Bryant Quinn says that business owners who do not deduct the costs of an office will leave a lot of money on the table this tax season.
However, not all home offices are eligible for deductions, and businesses must meet several requirements before claiming the deduction.
"The space has to be your principle place of business where you meet clients, handle orders and do the paperwork," said Quinn. "Also, you have to use it exclusively for business even after hours. It can't switch to being a TV room, exercise room or spare bedroom for guests."
Additionally, Quinn says the office does not need to be a full room, so long as it is clearly marked off as a business space. Lastly, Quinn says that a home office tax write-off cannot exceed the gross income of a business.