 Home-office
deduction for eBay entrepreneur
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 Dear
Tax Talk,
I am in the process of starting up eBay in my
home. I am also alone -- meaning I have extra rooms for the first
time! Divorced.
If I set up a room for JUST business, even if
I do not make money the first year, will I benefit taxwise?
-- Dan
 Dear
Dan,
I imagine the first thing you need to sell on
eBay is the stuff your ex left behind, intentionally or not. You
hear a lot of negatives about claiming home-office expenses, and
they really don't amount to much of a tax savings. Publication
587 is IRS's whopping 31-page guide to claiming a tax benefit
for expenses you already incur. In order to qualify the home office,
you have to use the room exclusively and regularly as your principal
place of business. Exclusive means as you said -- JUST for business.
Regularly means that it is used more than just occasionally. For
example, you're regularly in that room to work on your eBay business
and the business involves more than just an occasional product offering.
As an eBay seller, you'll be considered self-employed.
You'll use Schedule
C to report your business income and expenses. Line 30 of Schedule
C is used for claiming home-office expenses and it refers you to
carry over the deduction from Form
8829.
Form 8829 asks you to break out your home-office expenses
between direct and indirect expenses. Direct expenses would be repairs
such as painting the room; indirect expenses would be utilities,
gas and gardening that pertain to the entire home. Your indirect
expenses are limited to the number of square feet the office space
occupies in relation to the total square footage of the home.
Additionally, no deduction is allowed for indirect
expenses other than mortgage interest and taxes if there's no net
business income for the year. If you don't make any money in the
first year, you don't lose your home-office deductions. You can
carry them over to a subsequent year when you may have income, which
isn't a bad benefit if the business does take off.
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