There are many benefits and challenges that come with starting a home office. When begun with proper forethought a home office project can offer tax advantages and create an important distinction between work and living space for those that earn an income from home. Here are three considerations that should serve as an ultimate guide for starting a home office.
Before setting up a home office it pays to plan in order to determine how the space will be used. This is not only important for maximizing space but also for tax considerations. Some questions that need to be asked are:
- How much space is needed?
- Does the space need to be a separate structure?
- Is inventory storage required?
These answers to these questions and others will help one decide how much home office space is required. A freelance writer may only require a spare bedroom while someone that sells physical products might need a small building that is detached from their primary residence.
The planning stage is the time to get organized, especially when it comes to preparing for the inevitable tax filing. Home office owners need to know the total square footage of their home and how much of that is allocated for work space as well as other various details. Keeping good records throughout the process is essential.
From day one it is important to track all expenses associated with a home office. These expenses can include major items used in a business such as a computer and printer, mobile phone and Internet service, and even any physical improvements that are made–new paneling or carpet, for example. Failing to keep receipts for all home office expenses will yield much frustration at tax time.
Publication 587 of the Internal Revenue Service is a great guide for anyone setting up a home office. It clarifies what expenses need to be tracked and what documentation is typically required on a tax return. A good rule of thumb is to assume that every expense will be deductible and keep a record even when there is uncertainty. The bottled water delivered to a home or purchased just might be an office expense if it is consumed in the work space.
Make it Unique
The best way for one to get inspired about creating a home office is to make the space unique and reflective of their personality. A sterile, drab environment is not going to be conducive to doing one’s best work. This is especially true for creative souls–artists, writers, or musicians.
Many wonderful things can be done with a single room by using creative placement of furniture or movable partitions to create flow. One important thing to remember is that clutter tends to dampen productivity. Less is often more where a home office is concerned. Use storage areas wisely.
Resale shops can be a great source of artwork and other unique items that help to personalize the home office space.