With more and more people working and running businesses from home, the home office has never been a more important topic. There are many reasons why a small-business owner might want to work from home. For instance, starting a home-based business means far less overhead than if you have to buy or lease a separate workspace. And by running an energy-efficient home office, you can help reduce energy costs while maximizing your profit.
Home Office Tax Deduction
You can benefit from the IRS home office tax deduction if you’re self-employed. Before you file, it’s a good idea to consult an accountant to explore the nuances of the tax law. Here are the basic questions to determine if your space could qualify for a home office tax deduction:
Is your space an office? To qualify, you must be using your home “exclusively and regularly” as your place of business.
Does the office need to be separate from the rest of the house? No. Any space that is “separately identifiable” as your workspace could qualify, and it does not need to be a separate room or include a wall or partition.
Is your home a “principal place of business”? This does not mean that your home must be the only place of business. It needs to be a place where your administrative and management activities are conducted, and you don’t conduct those activities in any other business location. The IRS describes these activities as “billing customers, clients or patients; keeping books and records; ordering supplies; setting up appointments; forwarding orders or writing reports.”
“Space” can be easily measured, but what about things like home office energy expenses? It’s unrealistic to measure how much energy is being used specifically in your home’s office space, separately from the rest of your residence. You’ll have to calculate it into your home office tax deduction a little differently. Knowing what is tax-deductible is essential when it comes time to file a home office on your taxes.
How to file a home office on your taxes
What is tax deductible depends on how you file your home office on your taxes. There are two different ways to file: (1) The simplified method which would allow you to simply take $5 per square foot up to 300 square feet, or $1,500 total; or (2) Actual Costs (Form 8829) (Form 8829). If you choose Form 8829, you could deduct for:
Real estate taxes
Home repairs and maintenance (with certain specifications)
Homeowners’ insurance premiums
This is accomplished by multiplying each expense by the percent of your home that’s being used as home office space. In other words, if 10% of your home is office space and you pay $200 per month for gas and electricity, then you could deduct $20 per month, or $240 per year, for that alone.
For more information, there are several online tools and resources that can be helpful if you work from home. What is tax deductible? The surest place to get your answer is the IRS website.
Home Office Energy Savings Tips
Managing your home office energy expenses can help you save money, so creating an energy-efficient home office is in your best interest. The type of business you’re in will ultimately determine your home office energy expenses. If you’re working with computers and other electronic devices, you can save energy in your home office by making small changes to your day-to-day routine.
Let’s take a look at lowering your home office energy expenses in three ways: technology, heating and cooling, and lighting and layout.
Reduce home office energy expenses by managing technology
Use power strips. Plug all your computer-related equipment into a single power strip, or surge protector. These strips are designed to protect your equipment in the event of a power surge. Plus, they allow you to power down all your equipment with the flip of a single switch. When not in use, you can turn off the power strip or disconnect your equipment from the power source to maximize home office energy savings.
Use power-saving settings. You may need to set the sleep mode or other power-saving features on your computer and other devices. Some machines’ default is to go into sleep mode after 20 minutes of nonuse, but you can adjust those settings. Keep in mind that your sleep settings might not work if you have screen savers on, so make sure that you set your equipment up to maximize your home office energy savings.
Go paperless. The benefits of going paperless in your home office are clear. You can not only improve workflow and communication across remote teams but also reduce business expenses. And with the assistance of smart small-business technology, you’ll be able to increase productivity while saving energy in your home office.
Automate and connect your home office. Using smart home technology is a great way to save energy in your home office. Simply connect your smart devices to a smart home hub and take advantage of the automation and energy monitoring features. And to make your home office more energy-efficient, try pairing your smart appliances with smart plugs, such as the PowerPlug. These devices allow you to take even more control and save electricity in your home office regardless of where you are.
Create an energy-efficient home office through heating and cooling
Heat or cool only the space you’re using during work time. If you’re at work alone during the day and your workspace is small enough, you can reduce home office energy expenses by focusing heating or cooling in just that area. In summer, keep the thermostat a little higher and, in winter, keep it a little lower in the areas where you’re not working.
Use a space heater or fan to keep your workspace comfortable. An energy-efficient space heater is a great addition to your energy-efficient home office. With a space heater, you can control the temperature in the specific area where you’re working. Likewise, using a fan or energy-efficient air conditioner in the summer can keep you cool while also saving electricity in your home office.
Layer clothes to stay comfortable. By dressing to the weather, you can save energy working from home without sacrificing comfort. Bundle up in the winter and pare down your layers in the summer. Letting your wardrobe do the work, rather than your furnace or air conditioner, can help save electricity while working from home.
Home Office Layout Ideas for Energy Efficiency
How can you save energy while working from home? Use a combination of natural light and efficient electric lighting to create the atmosphere you need to be productive — while still benefiting from home office energy savings.
Find natural light if it’s available. If it’s available, using natural light instead of electricity is a helpful business energy saving tip. Especially if you’re working on a computer, the natural light combined with the screen display could be plenty. Just be sure to position your computer screen or monitor so that the natural light doesn’t create glare.
Replace incandescent light bulbs with LED lighting. This can be one of your most productive home office layout ideas: fewer lamps or overhead lights, more illumination. LED or CFL bulbs are more energy-efficient than incandescents. Plus, pairing LED or CFL bulbs with an energy-saving light switch can make your home office even more energy-efficient.
Use window coverings.Energy-efficient windows are great for saving energy in your home office. But window coverings are a more affordable option. For example, white window shades and awnings can help keep unwanted heat out in summer. This means less energy spent cooling and more home office energy savings.
Bonus tip: Configure your space to avoid “wire spaghetti.” Power strips do more than protect equipment and save energy; they also prevent “wire spaghetti,” the tangled mess of wires cluttering your space. Keeping devices plugged in together in a single location can free up your space and improve productivity.
Whether you’re presently working from home or you’re considering setting up a home-based business or home office for the first time, these factors could go a long way toward reducing your home office energy expenses. An energy-efficient home office can benefit your bottom line while also improving home sustainability. Combining some energy-savvy practices with good home office layout ideas can help you be comfortable, stay productive and save money.