Working from Home Brings Advantages, Disadvantages

Who can resist the idea of a 30-second commute? A lunch break with loved ones? Not to mention, never again being distracted from your work by that guy yammering on the phone in the next cubicle? There are a lot of advantages to working from home. But before trading in that suit for some comfy sweats, you’ll want to be sure you’re prepared. Here are a few of the issues you may want to think about when you set up your home office space.

Home Office Tax Deductions: Space Matters

There are important tax considerations for people working from home. When you’re setting up your work space, you’ll want to make sure your set-up complies with IRS requirements, so you’ll be able to take your home office tax deductions with confidence. One main rule of thumb is that you’ll need to designate a space in your home that’s used exclusively and regularly for your business. It may be a room, or just a portion of a room, but that space can’t be used for anything else.

The reason why? The square footage of your home office space is factored in as a percentage of your total square footage, and deductions are calculated accordingly. For example, if your home office is 100 square feet and your house is 1,000 square feet, 10 percent of your rent or mortgage payments can be deducted. That’s why the boundaries of your workspace need to be crystal clear.

Here are some other things you should know about the home office tax deduction:

• If you have a home office, you can deduct a home office percentage from many of your household expenses (such as mortgage interest, property taxes, utilities, homeowner insurance or rent).
• If you own your home, you can also depreciate the business portion for tax purposes.
• If you use areas in your garage, basement or attic as storage space for your inventory, you can add it to your home office space.
• If you use areas in your garage, basement or attic as storage space for your inventory, you can add it to your home office space.
• Your home office should be equipped with sufficient electrical outlets to safely support your office equipment and appliances, as well as connections for your telephone, fax and Internet access. Any costs incurred to add outlets and any other utilities to your office (such as heating and air conditioning ducts) are tax deductible.

Set clear work/life boundaries

Aside from the tax considerations, there are other good reasons to set clear boundaries between workspace and home space that are purely psychological. To really make sure your workspace is a productive one, you may need to create time boundaries for yourself, as well as spatial ones. For example, it may be tempting to catch up on your web surfing, or get started on that DIY home improvement project you’ve been meaning to get to, or just get involved in daily family goings-on during the workday since, after all, there’s no one stopping you. (Who wouldn’t rather cuddle their kids than do just about anything work-related?) Similarly, it might seem like a good idea to slip off after dinner to get just a little more work done, since your workspace is right there.

To protect your work life and your home life, be mindful of the temptations to blur these boundaries and establish time-management strategies that work for you. It might help to determine what your “on-the-clock” hours are, and make sure you spend those hours in your work space—doing work and only work. Then, when you’re off the clock, you’re really off the clock.

Make sure your home office space is protected

Another crucial concern for people who work at home is protection from legal liability—and worse. It’s important to make sure you get insurance that’s particularly designed for that purpose. Most homeowners policies aren’t designed to cover the business use of the home, which means that if a visiting client slipped and fell in your home office space, resulting medical bills—or lawsuits—wouldn’t be covered. Plus, what if something terrible happened, like a fire destroyed your home? Aside from the time and money you’d have to spend getting your home-based business up and running again, you’d most likely lose a substantial amount of income. And since it can be seen as a business expense, home-based business insurance is something people who work at home can’t afford not to consider.

Starting a Business in Retirement

If you’re retired and thinking about venturing into a new career or starting your own business, you’re not alone. Working in retirement is a growing trend. More and more Americans are seeing retirement as an opportunity to try their hand something they’ve always dreamed about – such as starting their own enterprise. But before any new business can get off the ground, there is some research to do and a number of factors to consider.