Working from home has many appeals that can add value to your life. But before buying a house for your home business, pause for a moment to think about the following legal and logistical aspects.
Is there a dedicated room or separate space for your business? Can you turn a room into an office and still have enough space for your family? Think about your home office furniture, or what furniture you’ll need to purchase. If you will have employees working in your home, they will need access to bathroom and kitchen facilities.
Check into local rules and zoning laws. Some governing bodies have restrictions on types of industry or require business licenses or permits. Beyond city or county ordinances, homeowner associations often place additional limitations on home businesses, not wanting to clutter the neighborhood with clients’ vehicles. Your HOA might frown upon – or prohibit – vehicle wraps and yard signage that promote your home business. Take care to follow the rules to avoid fines, lawsuits, and disgruntled neighbors.
If you don’t see clients in your home office – or can meet them elsewhere – lack of a private entrance might not pose a problem. However, if a separate entrance is required, make sure it (and all inside facilities) adhere to Americans with Disabilities Act (ADA) requirements and legislation for handicapped and disabled accessibility.
If your home business will receive deliveries or mail packages, check with all delivery services to set up delivery and drop-off procedures.
Calculating Expenses and Reimbursing the Household
Since a home office will use your utilities, the business should reimburse the house for its expenses. Measure the square footage used by the business, and then divide by the total home square footage to get a percentage. Multiply the total bill by that percentage to figure out the amount. The business can then write a check to your personal account, keeping expenses separate for tax purposes. You can use the same process with your mortgage to calculate appropriate rent for your home office.
Tax Implications of a Home Business
A home office can positively affect your taxes. An accountant can answer your questions about how to maximize your deductions. Save receipts, bills, invoices, and proof of payment relating to home office expenses in folders by tax year. This will make it easy to prepare your taxes.