If you use part of your home for your Notary business, you may be able to claim a deduction on your income tax for its use. However, the government has strict restrictions when making such claims. IRS Publication 587 provides rules and guidelines that you should be aware of before seeking a home office deduction.
1. In order to claim a home office deduction, the area in your home must be used solely for business purposes. For example, if you use your kitchen to meet signers for loan document signings, but the room is also used by your family to eat or prepare meals, the kitchen would not qualify for a deduction.
2. The area must be either your principal place of business, or a place where you meet with clients and customers on a regular basis.
3. If you conduct business activities outside your home but have dedicated an area of your home as the sole fixed location in which you perform administrative or management activities for your business — such as billing customers and clients, recordkeeping or setting up appointments — it may be possible to claim the area in your home as a deduction.
4. If you are an employee rather than a self-employed entrepreneur, you cannot claim a home office deduction if you rent the part of the home used for your business to your employer. Also, the employee’s home business use must be for the convenience of the employer to qualify for a deduction. An employee must also meet all other requirements for a home office deduction.
5. The amount that can be deducted is calculated based on the percentage of the area of the home used for business.
The IRS has announced simplified rules for calculating amounts for a home office deduction, however these new rules take effect for your 2013 returns, which you will file next year. They do not apply to your 2012 tax returns.
Eligibility for home office tax deduction can be affected by numerous factors, and you should first confirm that you meet all necessary requirements before proceeding. To answer questions about your specific tax situation and confirm if you are eligible for a deduction, contact the IRS or a qualified tax professional.
David Thun is an Associate Editor at the National Notary Association.