Do you work from home? Is there a special part of your home that you use exclusively for business on a regular basis? If your home office is the place where you meet clients, customers, or other business related persons, you may qualify to deduct expenses related to the operating costs. Generally, expenses such as utilities and homeowner’s insurance (or your rent if you are not a homeowner) are non-deductible, as they are considered a personal expense. However, when you have a home office, you can deduct a portion of these costs using either the actual expense method or a “safe harbor” rule. The latter is figured by multiplying the square footage of you home office by $5, with a size cap at 300 square feet. That means the max deduction is $1,500.
Home Sale Profit
When you sell your home, you can enjoy profit of up to $250,000 without worrying about being taxed, as long as you owned the property and lived in the home for at least two years of the previous five prior to the sale. If you file jointly with a spouse, the profit margin is increased to $500,000. If a spouse has become deceased, and the home is sold within two years after the death, the surviving spouse is still considered married, and therefore eligible for the full $500,000 exclusion. There’s no limit to the amount of times this profit exclusion can be used, however it can only be used once in a two-year period.