ByAli Sahabi of Optimum Group, LLC
President, Building Industry Association (BIA) Baldy View Chapter
Go back just a couple of decades and think about what a home office entailed: typewriters that weighed as much as a microwave oven, adding machines that only weighed slightly less, bulky desks, unsightly filing cabinets and landline telephones that often restricted movement to within a few feet of the desk. Then put them in a room that tried to protect the rest of the home from the noise they all created.
Well, that was then – this is now.
Today, nearly everything required of a home office can be accomplished with a computer that slips easily into a briefcase or a backpack – except one thing that hasn’t changed: the need for a dedicated space in which to conduct business.
Whether starting a home-based business, seeking greater personal convenience, increasing business efficiency or reducing one’s footprint on the environment, home offices (or “dedicated workspaces”) have become one of the most popular remodeling projects in America today. Whether it is designed as a primary workspace or a satellite location, building a home office can be a great investment in your business and your home.
Like homeownership, a home office should be considered as a major investment in your financial future – so approach every detail in the same manner you would any investment. That is why if you are considering a creating a home office space, the first thing you should do is log onto the Internal Revenue Service’s (IRS) website at www.irs.gov and download Publication 587 - Business Use of Your Home (Including Use by Daycare Providers). Many of the costs of running home offices or businesses can be deducted from homeowner’s taxes if they meet certain criteria and many improvements may be deductible. This publication will provide an informative guide to what you need to know and what criteria must be met if you will want to claim deductions on your income tax. For example, if your home office occupies a percentage of the overall square footage of the home, then that percentage of the home’s overall expenses such as mortgage interest, real estate taxes, homeowners' insurance, utilities and maintenance (as well as an allowance for depreciation) may be deductible. The space doesn't have to be the principle place of business or a place to meet with customers, but must be dedicated to operating the business rather than a space that also has a lot of non - work related uses.
Because certain improvements to your workspace may also be part of your home office deduction, your next step will be consider whether you will be making simple do-it-yourself projects such as painting the room or introducing major modifications such as adding walls, windows, doors or electrical wiring. Because conducting an office in, or operating a business from your home poses significant legal and tax concerns and any improvements to your home will affect its value, you should consult a certified remodeling professional. Remember, any major improvements that require additional construction may require permits from your local authority. An oversight in building a home office could create huge problems later on when the home is on the market.
If you have settled on a plan that requires major modifications and they meet the criteria set forth by the IRS, your next task will to be to contact a licensed and trained remodeling professional. Visit the National Association of Home Builders (NAHB) website www.NAHB.com and click on “Builders & Remodelers” for a directory of professional remodelers. Trained and certified professional remodelers will share information on tax credits and rebates and make sure all of the required permits are in order.
Then, make sure you allot adequate additional space for record or inventory storage or creating separate workstations for different tasks
Remember, to get the best tax advantage from your home office or workspace is to itemize your taxes and be sure to consult with a professional. If you are filing yourself, take the time to at least consult with a professional before you file – it could save you lots of money and stress.
For more information on remodeling, homebuying or the benefits of homeownership, visit www.biabuild.com on the web and have a happy Memorial Day.