This year has brought many changes, the biggest change being the number of people who are now working from home instead of in their office. If you are now working from home, you are most likely using some of your personal assets for work. This means you can claim new tax deductions! For example, if you do not claim a home-office deduction and are now working from home and sitting in a chair you already own for work, you can depreciate part of that chair. If you use the chair for business 75 percent of the time, you can depreciate 75% of the value of that chair.
The Bradford Tax Institute explains how to calculate the depreciation of business assets to claim tax deductions.
“To determine the basis to use for depreciation, use the lesser of
- fair market value on the date of conversion from personal to business use, or
- adjusted basis of the property (generally the amount you paid for the asset plus the cost of any improvements).”
If the chair you are using was purchased for $2000 and was worth $1000 at the time you converted the chair from a personal asset to a business asset you would use $1000 to calculate your depreciation deductions.
You are also able to claim deductions for your home office, even if you use more than one room for your business. The Bradford Tax Institute explains, “Section 280A(c) states that you may claim a home office based on the portion of the dwelling that you use exclusively and regularly for business. Thus, the law dictates no specific number of rooms or particulars regarding the size of the office.” For example, if you use an area in your home as an office space exclusively for business and another area of the home you use for storing equipment or files that you use for daily work, you can claim deductions for both of these areas.
For more information refer to the following articles from The Bradford Tax Institute and contact Tax Divas for all your tax needs!