While writing an article on the home office tax deduction, I was specifically searching for two things.
- Proof that those with a "space" as opposed to a completely isolated "room" could still take the deduction.
- Any word on if the deduction does, in fact, make one more likely to be audited.
Those writers who are paying taxes on their freelance writing income will want to reduce their tax burden as much as possible. So, if you qualify, I do recommend that you take the home office tax deduction. The IRS does indeed say that the space you deduct does not have to be a separate room. If your space is obviously distinguished as separate and is used exclusively for your writing income, then you may take advantage of this deduction.
Unfortunately, bullet #2 was a bit more difficult to handle. I found one Certified Financial Planner from U.S. Chamber Magazine who said that taking the home office deduction would not increase chances of an audit. But, I then found a partner at PricewaterhouseCoopers who said the opposite.
My thinking is that writers who receive 1099s should indeed look at all the ways possible to decrease their tax burdens. Carefully document your home office and read the IRS laws, and an audit won't be a life-altering experience. *Although, I'm not a tax preparer, so take my experience as more of an example.
A timely issue, as we collect our paperwork for Tax Day. Just last week I was talking to a CPA who insisted I do just as you suggest. He says that as long as the home office deduction is not ridiculously large, it will not flag you for an audit. Auditors are looking for evidence of cheating, not evidence of freelancing. Still, I was wondering how many freelancers actually take this deduction (and how many cheaters hide money in it). My home office is used not just for my writing, but for managing my other business as well, and even a cursory look will affirm it’s a workspace, not a gamespace or a laundry room or whatever. So I’m going for it.
2008 will be my first year to do so. If I get audited in 2010, I’ll delve into your archives and find this post and tell you all about it.
I’m also going for it, so I guess we’ll both see. I didn’t take it last year, as I had exercise equipment in here. But we’ve rearranged some things.