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If you have a business at home -- either full-time or in addition to your job as an employee -- you could qualify for valuable home-office tax deductions. The key is that you use part of your house or apartment regularly and exclusively as the principal place of your business. If you qualify, you get to deduct all sorts of things, including part of your utility bills, as business expenses.
Sure, this is a controversial issue, and many taxpayers fear that claiming these write offs invites the IRS to swoop in with an audit. And there's no doubt that the IRS watches this area because it includes plenty of opportunities for fudging numbers.
But if you have a legitimate claim to this write-off -- and the receipts to back it up -- you'd be crazy to skip it. In the latest year for which statistics are available, taxpayers deducted more than $7 billion in home-office expenses. In the 25% tax bracket, those deductions would have saved $1.75 billion.
The message is clear: If you qualify for home office deductions, claim them. Don't let the worry of an audit lead you to overpay your taxes. I've always likened that to paying extortion.
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