In summary, Uncle Sam allows you the following additional tax deductions for having a home office: You can prorate your utilities by the square footage. That means your office square-footage versus the home’s total squarefootage.
For example, suppose the office is 730 square feet and the home’s total footage is 2,875. Dividing 730 square feet by 2,875 gives you 25 percent of the utilities and other expenses that are business related.
You can prorate the cost of your homeowners insurance along with related riders and policies in proportion to how much applies to your home business—additional liability for when clients come to your home and coverage for business equipment and fixtures, for example.
Depreciation is allowed on the office portion of the home. Prorating property taxes is also allowed. Property maintenance costs for the office space can be prorated (but tricky, so consult a tax professional first). Construction of an office on your lot or remodeling costs to add an office to your existing home.
However, these improvements would be taxed differently from your home, so consult your tax adviser for how this would affect your situation.
Tips: According the Remodeling magazine’s 2007 ‘‘Cost vs. Value’’ report, the national average that homeowners recoup from the cost of adding a home office when they sell is 57 percent.
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