Now that I have a freelance writing business, I decided to visit an accountant to see how running my own side business might affect my taxes. Obligatory disclaimer begins…..wait for it……now: I am not an expert and the below is not meant to be advice; you should seek your own expert advice before making any tax or business decisions. That said, here are some of the pros and cons the accountant told me about when I asked him if I should claim my home office for tax purposes. Again, I can’t vouch for their accuracy or whether they would apply to you or not. Bottom line: get your own accountant.
Pros of a Home Office
1. You can save money on your tax return.
2. You can deduct portions of money spent on your mortgage and perhaps even some utilities.
Cons of a Home Office
1. You exponentially increase your odds of being audited. Seriously, the odds of an audit apparently skyrocket.
2. You complicate your taxes and the cost of filing taxes if you use an accountant.
3. It creates additional paperwork.
4. The money saved may not be as large as you anticipate.
5. You can ONLY use the office as a home office. That means no non-business activity can take place in the dedicated home office. No watching television, no sitting around reading a book for relaxation, no play-wrestling your dog. Just business, nothing but business, all the time.
Anyone have any experiences with running a home office? Was it worth the hassle? Let me know as I’m trying to make up my mind about whether to eventually claim my home office or not.
It appears that my home office would qualify, but that doesn’t mean it’s worth the extra headache and the increased risk of being audited.
As always, thanks for reading and have a great Memorial Day Weekend.
Chris Thomas, owner of the online freelance writing and web-copy company, FreelancePF. Chris’s interest in personal finance stems from leaving grad school with six figures in student loan debt.