Home Office Space
According to the National Association for the Self-Employed, this is one of the two write-offs that people overlook most often (the other is vehicle usage for business purposes, detailed below). If you have a home office that you use as your primary place of business, you can write it off. (To determine the exact deduction, measure the square footage of both your home office and your entire house, then divide the former by the latter to calculate what percentage of your living quarters your workspace comprises.) Because many sole proprietors pad this ratio or misrepresent a primarily residential space as a work area, some taxpayers worry that the home-office deduction symbolizes a red flag to the IRS, but if you’re precise with your measurements and honest about your home-office usage, you most likely won’t incur an audit. In addition, if you’re a renter whose home doubles as your place of business, you’re allowed to deduct your rent as a work expense.
The IRS Web site states that people who use their cars or trucks for business are eligible to deduct work-related gas, maintenance, and insurance expenses, parking and toll fees, and the cost of overnight vehicular travel and local transportation. The IRS defines “local transportation” as driving from one workplace to another within your tax home (your regular place of work, including the general geographical area in which you conduct business); visiting clients; driving to offsite business meetings; and traveling to temporary workplaces when you have multiple employers. Keep in mind, however, that these criteria apply only to contract workers, not to full-time employees of a single company for whom these activities fall under the personal-commuting category.