One of the benefits of having a home based business (for freelancers, self employed contractors and small business owners) is that you can deduct the expenses relating to the space that you use to work. This can result in a significant reduction in your tax bill for costs that you would incur regardless, giving you one more reason to love being your own boss.
Criteria for Deductibility:
For home office expenses to be deductible, they have to meet the following criteria:
- It has to be your principal place of business i.e. you cannot deduct home office expenses if you have another office that relates to your business, elsewhere, even if you work 22 hours a day or you check your blackberry in bed.
- The space designated as your home office is used to earn business income and/or you meet clients or customers on a regular basis. You can deduct expenses relating to the workspace in your garage which is used for home improvement projects.