Home Office Deduction as Mortgage Help
By mortRevPlace on Apr 24, 2009 in Finance
I found this recent article to be very interesting: Apparently the current economy is expected to generate a rise in the number of taxpayers claiming the home office deduction, not because people are being dishonest, but for a variety of reasons:
- More people are being forced to work from home in order to make ends meet,
- More people are unable to move in order to find another job, causing a rise in telecommuting and home-based businesses, and
- People are more desperate to keep up their incomes so that they can continue to pay their mortgage
If you fall into one or more of these catagories, you might consider turning part of your home into a home office. The advantage is that your bills stay the same, but your tax liability decreases substantially, because part of your mortgage is now considered to be a business expense. That means less money spent on taxes, and enabling you to keep more of your income.
Of course, it also requires that you rearrange your house, condensing the living space into a smaller area. In order to qualify for the home office deduction, your office has to be exclusively for work — which means you can’t keep personal financial records in your desk, or even surf the Internet in your home office. But this may be a small price to pay for a lower tax bill and the ability to meet your mortgage payments more easily.
You might also keep this in mind if you are looking for a new house. Live work homes are becoming very popular, so if you’re looking for a new home in Carlsbad, CA, for instance, it should be pretty easy to find one that is well suited to support a home office.
Of course, planning to declare part of your home as a home office may help you better afford your mortgage, but be careful not to let this encourage you to overextend yourself. It is still important to stay within your limits. The home office deduction can help you save money on taxes, but it should not be used to get you into a house you can’t really afford!