Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Home Office

What it is:

The term home office has two definitions. First, a company's home office is its headquarters. Second, a home office is a place of business within a person's home.

How it works (Example):

Let's say John Doe is a freelance business writer and editor. His clients are around the world, and he does his work from a desk in a bedroom in his house. This is his home office.

When John does his income taxes every April, he deducts a portion of the expenses associated with maintaining his house, as well as all of his business expenses.

Why it Matters:

A home office is more than a desk in a corner. For tax purposes, it is a place of business. Not all home office expenses can be deducted, however. For one thing, the home office must be the taxpayer's primary place of business. If, in John's case, the square footage of his home office is 10% of his whole house, he may be able to deduct 10% of his mortgage, 10% of his utilities, 10% of his alarm system bills, and so on, as well as all of his business expenses. Alternatively, he may take a flat deduction of $1,500 beginning in the 2013 tax year.
 

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...