How to Create a Productive Home Office Space

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Friday, April 2, 2010; 12:00 AM

Many entrepreneurs think working from a home office will be a dream come true-- until they give it a try. The reality of working from home, however exciting the prospect, can be a shock to the system.

It's not all about fuzzy bunny slippers and skipping the day's shave.

A disciplined and focused person can save valuable time and money using a home office. But for others, working from home can be a big time-waster.

"If you are not disciplined enough, you can be much more inefficient than if you were at work," says Howard Hook, a certified financial planner and certified public accountant with Access Wealth Planning in Roseland, N.J.

Here's what you need to know before you dive into a home office.

The TaxesIf you create a home office space in your home, do it right. The IRS has very strict rules surrounding home offices because they give businesspeople valuable deductions.

Your home office must be used exclusively and regularly for business. That means the room you choose can't be used for both business and personal purposes, such as doubling as a guest bedroom.

An auditor may never know if you occasionally let your kids watch television in your home office, but you could be violating the "exclusive" rule if it happens regularly.

The deduction doesn't have to be for an entire room, if that section of a room is not used for personal purposes, says Cynthia Turoski, a certified financial planner and certified public accountant with Bonadio Wealth Advisors in Albany, N.Y.

"There is an exception to this for wholesale and retail sellers who use a portion of their home for storage of inventory and product samples if certain criteria is met," she says.

Check with your tax preparer if you're not sure you qualify for a particular deduction. Below are some additional tax items to consider:


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