Office at home

Can I deduct any costs of my home as a business expense?
The Tax Relief Act of 1997 provided hope to taxpayers beginning January 1, 1999. The amended law specifically provides that a home office qualifies as the "principle place of business" if (a) the office is used by the taxpayer to conduct administrative or management activities of a trade or business and (b) there is no other fixed location of the trade or business where the taxpayer conducts substantial administrative or management activities of the trade or business. The deductions will be allowed for a home office meeting the above two-part test only if the office is exclusively used on a regular basis by the taxpayer and, in the case of an employee, only if such exclusive use is the convenience of the employer. 

I have a legislative assistant in my home district, to whom I pay a token amount each month. Am I required to go through the process of filing payroll tax returns and withholding payroll taxes?
In most situations, all amounts paid for services are subject to payroll tax laws. In addition, workers compensation rules apply. However, there are some exceptions (such as in the case of an independent contractor). In any situation where there are various reporting requirements, you should consult your certified public accountant. 

Instead of an office in my home, I maintain a rented office in my district for the purpose of serving my constituency. What expenses can I deduct on my tax return for the cost of maintaining this office?
If the office is being used exclusively for legislative purposes, expenses related to the office rent, utilities, depreciation on improvements and equipment, etc. are 100% deductible (subject of course to the 2% of adjusted gross income limitation). However, expenses incurred during campaign time must be excluded. Also, if campaign contributions for maintaining the office exceed the cost of operating the office, then you may have taxable income. Keep a detailed record of all receipts from all sources to determine whether or not your expenses exceed your income. If expenses exceed funds from sources other than yourself, and such expenses are in fact campaign expenses, then these specific expenses are not deductible (see questions and answers under Campaign Expenses). 

Can I claim any deductions regarding my use of a personal computer for business purposes?
To obtain a deduction for a computer used in your home, you must establish that it is there for the “convenience of your employer and required as a condition of employment.” Furthermore, you must furnish substantiation to that effect. Also, you are required to document the business usage and the total usage (including non-business usage) of the computer. Therefore, under current law, it is very difficult to obtain a deduction for a home computer. Consult with your certified public accountant regarding the tax aspects of using a home computer for a business.  

More on the Ohio Legislator's Guide to 2007 Taxes

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