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Reason #3: Frequent (non-annoying) reminders It highlighted my potential write-offs while I got a sense of my everyday spending habits. Reason #2: Speed of learningīecause Keeper uses AI to streamline the user experience, the app quickly picks up your patterns, such as repeat purchases.Įarly on in my experience using Keeper, the app worked alongside me as I identified what I paid for to succeed as a freelancer. Hopefully, this free worksheet - and the Keeper app - can take the hassle out of expense tracking.īecause you deserve the biggest home office deduction possible.Since I‘ve been using Keeper for over a year now, I have a sense of what I can save - which has helped me feel more comfortable investing in my freelance business. Since most self-employed individuals have more than $1,500 in deductible business expenses each year, it's usually better to just track your actual home expenses. The maximum allowed square footage is 300, which means the simplified method caps your home office deduction at $1,500 a year. That amount may change from time to time, but it's currently $5.00 per square foot. Instead of tracking all your home-related expenses and writing off a portion based on your business-use percentage, the simplified method for home office deductions lets you write off a specific dollar amount for every square foot of our home office. How the simplified home office deduction works In most cases, this will be your best option in terms of tax savings, but we want to make sure you understand the simplified option as well. If you're using this worksheet to track all your home-related purchases, you're probably already set on the actual expenses method. There are actually two methods for calculating your home office deduction. Another method for calculating your home office deduction That's why knowing your business-use percentage is so important. Most of your deductible home expenses will probably fall into this indirect category. That's why you can only deduct a certain percentage of them - specifically, your business-use percentage. You benefit from these indirect expenses any time you're at home, whether you're in your office or not. These can include your rent, utilities, and any repairs that apply to your whole residence (like patching your roof or fixing your plumbing).
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On the flip side, there are also indirect home office expenses - meaning, all the other housing costs you pay for. (This worksheet can handle these deductions for you - more on that later!) These direct expenses have a business-use percentage of 100%, so they're 100% tax-deductible. You can't benefit from them when you're just hanging out on your couch or in the kitchen. These things are only used in the office part of your home. Direct expenses are things exclusively used for working from home, like: There are actually two types of home office expenses, direct and indirect. To put it another way, you can only deduct the business-use percentage of your home-related expenses. You need your business-use percentage to figure out how much of your home-related purchases you can deduct. Why does your business-use percentage matter? Your kitchen table, for instance, wouldn’t cut it. Whatever area you adopt as your workstation, it just has to be used on a regular basis and follow the " exclusive-use rule” - meaning, you only ever use it for work purposes. It has to be used regularly and exclusively for work A desk, rolling chair, and chair mat in your bedroom can absolutely be your workstation. We use the term "workstation" interchangeably with "home office" because it doesn't have to be a dedicated office room. Your workstation is just the part of the house or apartment where you do your freelance or independent contracting work. That would make your business-use percentage 10%.
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When it comes to the home office deduction, your “business-use percentage” is just the portion of your place taken up by your home office.įor example, pretend your apartment is 800 square feet, and your workstation is 80 square feet. What does your business-use percentage mean? Otherwise, keep reading for more information on your business-use percentage, including what it means for "direct" and "indirect" home office expenses. If you're already solid on the concepts behind the business-use percentage - or if you just want to learn how to use this worksheet - then that's all you really need to know. The Calculator will automatically spit out your business-use percentage in the shaded green box. The size of your at-home workstation in square feet.