Clean Run - March 2012 - 35

Tax Deductions Begin at Home
By Mark E. Battersby

numbers of people are working at home or operating a business from their home. Regardless of whether a home oﬃce is used for the convenience of an employer, an agility instructor who is based in a home oﬃce, or a home oﬃce or property that is used to supplement a kennel, training facility, or agility course, a tax deduction may be available.
Generally, the amount that can be deducted for home o ce expenses depends on the percentage of the home that is used for business. The deduction of certain expenses will be limited if the income from the business is less than the dog agility operation’s total expenses. While the tax deduction is available for the expenses of using the home for business purposes, it is only for those expenses that apply to the portion of the home used exclusively and on a regular basis as a home o ce or training facility. available for o ce space and other areas used for business in the home -- such as a studio, workshop, or garage. And according to the IRS, a “home” can be a house, condo, or apartment unit -- or even a mobile home or boat, as long as you can cook and sleep there.

Increasing

Meeting the Requirements
Naturally, to claim deductions for any business-related expenses, a part of the home must be used “regularly” and “exclusively” in a trade or business.

· Regular use: The IRS doesn’t o

· Exclusive use: Exclusive use means that a portion of the home is used only for

er a clear de nition of regular use—only that part of the home must be used for business on a continuing basis, not just for occasional or incidental business. This test can probably be met by working a couple of days a week from home, or a few hours each day. business. If a room in the home is used as part of the business and also for personal purposes, it does not meet the exclusive use test. However, a portion of a larger room can be set aside to be used only for business, as long as personal activities don’t stray into it.

Home Offices and Taxes
Whenever part of the home is used for business, a professional dog handler or trainer may be able to deduct expenses for what the IRS calls the “business use of the home.” If the technical requirements of the tax law are met, a percentage of many of the costs of running the home, such as utilities, rent, insurance, depreciation, mortgage interest, real estate taxes, and some casualty losses, repairs, and improvements (if they relate to the part of the house used for business) may be written-o or deducted. The home o ce deduction is available to renters and homeowners alike. It is
March 12 | Clean Run

According to the IRS, home o ce tax deductions depend on two things: a) whether the expense is direct, indirect or unrelated; and b) the percentage of the home used for business. Direct expenses are expenses that are directly related to the business use of the home, such as painting the home o ce. These types of expenses are deductible in full, subject to the deduction limit set by the business’s income and losses. Home o ce deductions cannot exceed the gross income from the home o ce activity. Indirect expenses, such as insurance, utilities, and general repairs are deductible based on the percentage of the home used for business. These expenses are only indirectly related to business use of the home o ce inasmuch as they relate to the entire home. Hence, if only 25% of the home is used as a place of business, then only 25% of rent or repairs are deductible.
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Clean Run - March 2012

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