04/04/2012 11:04 pm ET Updated Jun 04, 2012

There's Money in Your Home Office! Here's How to Find It!

It's early April and the weather is ridiculously nice. Reminiscent of middle school days, you're stuck inside your home office surrounded by IRS tax forms and receipts while your friends are outside enjoying the weather. We have less than two weeks left until income tax returns are due but it's important to get all the tax deductions you deserve.

The recent economy has spurned a surge in entrepreneurship and many entrepreneurs start their businesses from home. If you're an entrepreneur or small business owner you are most likely working out of your home. Your home office can be a much-needed tax deduction.

Generally, the Tax Code (IRC Section 162(a)) allows you to deduct expenses that are ordinary and necessary to your business. In addition, you may also get a deduction for your home office. Here are five things the IRS says you need to know to if you want to take the home office deduction:

1. Use of Your Home Office: You must use part of your home exclusively and regularly:

• as your principal place of business, or

• as a place to meet or deal with patients, clients or customers in the normal course of your business, or

• in any connection with your trade or business where the business portion of your home is a separate structure not attached to your home.

2. Other Locations: For storage use, rental use or daycare facility uses, you have to use the property regularly but not exclusively.

3. Percentage of Business Use of Your Home: Generally, the amount you can deduct depends on the percentage of your home used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

4. Form to Use If You Are Self-Employed: If you are self-employed, use Form 8829, Expenses for Business Use of Your Home to figure your home office deduction and report those deductions on Form 1040 Schedule C, Profit or Loss From Business.

5. If you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be for the convenience of your employer.

The income tax code has a lot of deductions for small businesses. The key is finding out what deductions you qualify for and how to legally maximize those deductions. Contact your CPA or tax adviser before exploring any new tax positions as your facts and circumstances may differ. Now hurry up and organize your receipts so your accountant can file your tax returns!

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