I'm a graphic designer who does freelancing, but I also work as an employee for another business full time. Since I do my freelancing in my home office, I understand a percentage of my utilities is deducted and this percentage is reflected by the office space sq f vs the whole house sq ft.
1. Since I use my cell phone mostly (more than 70%) for self employed work, does this go under the above deductible home/office utilities when doing my income tax? Where would it go if not?
2. Is there a maximum value or percentage of utilities deducted in a home office that can go against income made?
You can write off a % of your cell phone as a business expense; be prepared to prove you used it for business calls
The amount of utilities you can write off depends on the % of home use; example if you used 1 room out of 5 as an office for business use, then the eligible amount would be 1/5th of the expenses. If you show a loss of income/expenses then the use of home office expenses cannot be used to increase the loss, but the amount can be carried forward to a year in which you show a profit.
Note: the 'home office' must be a room dedicated to such work; it cannot be a desk in the corner of your living room.
I recall for any home business/self-employed business at home, you need to calculate expenses as follows:
% home used for home business x time spent for home business x expenses for year = eligible deduction.
For example:
150 sq. feet used for home business; out of a 1500 sq. foot home.
Spend on average 4 hours per day for home business; out of 24 hours per day; 7 days a week.
Utility or phone bill is $50 per month; for 12 months in 2011 calendar year = $600.
Financial cents is correct ,it is based on percentage of the house you use for business and you can also deduct that % of mortgage interest ,insurance and taxes as well.
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