fies. The owner qualifies even if
the business is several miles away
and he or she goes there every day.
Interestingly, the tax code does
not specify what “substantial”
means. Does the owner have to
do 50% of his administrative work
at home to qualify? Seventy per-
cent? Ninety percent? That is left
to individual judgment.
Here’s the test
To determine if you qualify, you
must answer the following state-
If you can say yes to all of these,
you probably qualify for the home
office deduction. Check with your
accountant. If there is some area
where he has doubts, you might
be able to change how you do
things before the end of the tax
season so that you clearly qualify.
For instance, if you were using
the kitchen table for doing paper-
work, you might be able to create
a permanent office space in a day
room and use that exclusively for
business. Or, if you were in the
habit of going to your shop in the
evening to handle paperwork, you
might set up a space at home to
do these administrative chores. Or,
you might pick out several tasks
which can be done at home, and
arrange to do them there each day.
How much will you save?
Here’s how you will benefit from
a home office deduction. All rele-
vant expenses and proportionate
expenses are fully deductible
expenses to your business. Say you
use 20% of your home space for
your home office. Then 20% of all
house costs, including mortgage
interest, repairs, taxes, utilities
(excluding water), insurance, and
depreciation are fully deductible.
Moreover, if you make repairs to
your home office, they are 100%
deductible. So, if your total house
The biggest change in the tax
code for the upcoming year is
the expansion of the home office
deduction. For sign shop owners
who utilize a home office, this
means that now you may be able
to take advantage of this savings.
As home office deductions could
easily run $3,000 per year, this
change might mean a significant
reduction of paper profits and
a lowering of tax liability.
A home office deduction can be