My boyfriend and I are web developers. We work for a few marketing companies via 1099, and do lots of freelance (plug: http://a153.carbonmade.com)
We are fairly young and trying to decide what is the best situation for us in terms of taxes and dwelling.
Is there an advantage, if you are working out of your home 80% of the time to owning a house, or is there any benefit to working from your apartment in terms of taxes, etc?
Also, does it make more sense in the long-run to own a home, especially if you are working out of it?
You need to do research on this stuff and then consult a tax professional. The reason I say that is that the IRS is super-strict about mixed-use home/business properties. I won’t pretend to be an expert but I do know that you can’t just expect to work on your kitchen table and expect to get much financial benefit from it. You can have a true home office but it has to be dedicated for work only and set up for it. That can save you money but only you know if you are willing to jump through those hoops and be prepared for an audit if the IRS suspects you are using it as a regular living space as well. That is one of their biggest audit flags for individuals.
There are web resources that can explain things much better and help you figure out if you want to pursue something like that.
You do get to declare your workspace on your taxes, but it’s only the total percentage of the dwelling you dedicate to work. I use TurboTax and there’s a lot to fill out about my work space, which is like 10% of my total square feet. I do believe I am then able to declare 10% of my utilities as well. You can also declare machinery and stuff that is dedicated to work (printers, computers, etc).
I don’t think it’s a huge tax savings, but yes you can definitely deduct it from your income.
If you own your home, you can deduct the interest you pay on your mortgage. That can be a hefty piece of change, but you have to balance that against the overall cost of home ownership.
I ditto the other comments about seeking a tax professional’s advice. My father worked out of his house, kept scrupulous records and deducted (IIRC) less than 80 square feet. He also got audited several times. If his record-keeping wasn’t so thorough, he probably would have been hammered.
Maybe, and no definitely about it. As Shagnasty sez, (and my Bro the retired IRS agent now Tax Prep agrees), Office in the Home is a huge audit target. Consult a Tax Professional.
