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home office deductionFreelance writers typically work from home. The numbers of freelancers are only going up. It was reported on Anderson Cooper 360 just a month ago that “more than 17 million Americans no longer work for companies, but sell their services day-by-day.” Whether you are just starting a career as a freelance writer or you have been working independently for decades, the Internal Revenue Service has recently made changes to how individuals may take a home office deduction.

Many writers I know have full-time jobs unrelated to their literary life. If you write with the intent of making a profit, even if it is a part-time endeavor, you have the ability to take a home office deduction. The space in your home must be exclusively used for your business on a regular basis. This means you can’t claim your bedroom as a tax deduction if your writing desk is set up there. (Unless you’re running some other type of business! ::wink::) Note: The area of your home office that you use for writing does not need to be sectioned off by a permanent partition.

Taxpayers qualify for the home office deduction as long as there is no other space used for administrative/management duties. For example, I’ve been looking for an office space outside of my home, one where I can not only manage accounting and other administrative tasks for my writing business, but write and host critique groups and writing workshops. If I eventually find a space for these purposes, the rent expense for the space would become a tax write-off and I would no longer be able to take a home office deduction.

The new home office deduction requirements went into effect in January 2013, which means it will affect tax returns filed in 2014. The revision includes a “safe-harbor method” that allows a simple calculation based on the qualified square footage used in the home multiplied by $5. (Square footage cannot exceed 300 square feet.) This rate may change in the future, but it will not be adjusted for inflation. The restrictions of using the safe harbor deduction method include: No depreciation allowed, and by electing the safe harbor deduction it is irrevocable for that year. The IRS describes the safe harbor method as a “simpler option” and takes away much of the hassle of recordkeeping for those who work from home and take an office deduction.

The alternative to the safe harbor method is the actual-expense method. Both methods calculate a deduction that must not exceed the “gross income derived from the qualified business use of the home for the tax year reduced by the business deductions unrelated to the qualified business use of a home,” according to the Journal of Accountancy.

This may seem cumbersome for writers who are busy focusing on deadlines or plot revisions, but if you are making money from your writing you should take advantage of every tax benefit available to you!

As is the nature with the Internet, and being that I am not a tax professional nor finance expert, none of this is intended as tax or financial advice. This post is simply a way to encourage writers to explore new and existing tax requirements that may benefit their writing careers. Consult with an accountant or your tax adviser annually. The IRS has requirements for qualified types of business activity.

For a peek at my writing office – take a look at my article for The Freelance Strategist.