Adding home office bestows advantages


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Home offices once were thought of as luxury items, but today’s tough economy — with its frequent layoffs and corporate downsizings — has led many people to run their businesses from home.

Working from an office in your residence can create conflicts with family and roommates, but there are many advantages, says Joseph W. Webb, author of the book “The Home Office That Works.”

“Now is the cheapest time ever to work at home because of all the things you can do online,” he says.

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Advantages of a home office

Widespread use of the Internet has made it easy for businesses to communicate and share documents with clients, often eliminating the need to spend money on leased office space. Once you begin working from a home office, you no longer need to spend money driving to work each day, eating out for lunch or maintaining a workplace wardrobe, Webb notes.

Another benefit is that offices tend to increase the value of homes, says Walter Molony, spokesman for the National Association of Realtors. Many buyers pay extra for homes with offices.

“We have a periodic study called ‘The Profile of Buyers’ Home Feature Preferences,'” Molony says. “When it comes to rooms buyers were willing to spend more for, one is a den/study/home office/library. Forty-four percent said they would be willing to pay $1,920 more for a home with that room.”

Taking tax deductions

Lorie Marrero, the author of “The Home Office Handbook,” notes that one of the benefits of working from a home office is that you can take a tax deduction. Generally, you qualify for a deduction if there is a clear separation between office and household. If you don’t have a separate room for your office, this often can be accomplished with a screen or partition.

To calculate your deduction, you can add up all your office-related expenses or simply multiply the square footage of your office space by $5. This time-saving calculation allows you to take a deduction of up to $1,500, says economist Eric Tyson, co-author of “Home Buying for Dummies.”

Can you deduct business use of the home expenses?

Is part of your home used in connection with a trade or business?

Are you an employee?

Do you work at home for the convenience of your employer?

Do you rent part of your home used for business to your employer?

Is the use regular and exclusive?

Is it your principal place of business?

Do you meet patients, clients or customers in your home?

Is it a separate structure?

Deduction allowed

No deduction

The catch is that your actual expenses may be greater than $1,500, entitling you to a larger tax break. Before you use the shortcut calculation, “look at what you deducted in previous years to make sure you are not leaving too much money on the table,” Tyson says.

Adding up the costs

Jay Kerr, principal at K West Builders Inc. in Del Mar, Calif., says setting up a home office doesn’t have to be costly. If you have a spare bedroom or room for a desk in your kitchen or family room, you can create an office without remodeling or buying many furnishings.

Kerr often is asked to turn spare bedrooms into custom offices with expensive desks and cabinetry. Costs can range from a few hundred dollars to more than $10,000, depending on how elaborate the homeowner wants the office to be.

Jay Kerr built this home office in an alcove for about $4,200, including the computer.

Example of home office by Kerr

Kerr has built a home office for his wife in a small alcove at the top of a staircase. The space is 9 feet by 5 feet. The prefinished maple that Kerr used to build a desk with drawers and built-in cabinets cost about $1,000. He built a wall-mounted bookshelf at a cost of $1,200.

He equipped the office with a computer, two monitors and wireless keyboard for about $1,200. A printer/scanner cost another $200. He spent another $75 on a paper shredder and $20 for a bulletin board.

Kerr says he splurged on his wife’s chair, spending $500.

“It’s expensive because my wife spends a lot of time there,” he says. “It’s ergonomic.”

The project cost Kerr just under $4,200. The secluded location gives his wife just the right amount of privacy. It separates her from the family but because there is no door, she can listen to her children playing downstairs.

Avoiding family disruptions

Working at home with family members or roommates can be a challenge. An office must be quiet enough to allow you to concentrate. While screens may be adequate for some people, Webb prefers a separate room for his home office.

When you close your door, “people have a good sense of the fact that you are working, even though you are at home,” he explains. “You need to lay out ground rules.”

Being there for the kids

Despite occasional disruptions, parents who work at home often end up spending more quality time with their children, says Chicago psychologist Elizabeth Lombardo, author of “A Happy You.”

She enjoys taking an office break each day when her children return home from school.

“Even though I’m still working, I get to check in with them,” she says. “It really helps us stay connected.”

Most home-office conflicts with family members can be worked out, she adds. “Anyone who chooses to make it work can make it work.”

Can you deduct home office expenses? | Desk, lamp,shelf: illustration© Bplanet/; people, conversation bubble, & neck tie © Dooder/; office plant © kstudija /; house icon © Leone_V/; calendar © oculo/; Desk assets illustration © pskat/; office supplies © robuart/; office chair ©;