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According to the U.S. Internal Revenue Service, the expenses related to the part of your home used for your photography business, must be “exclusive, regular and for your business” to be deemed tax deductible. -
To be “exclusive,” the portion of your home must only be used for your business. It can be a room or a separately identifiable space, which doesn’t require a partition or other means to identify it. The space is not considered “exclusive” if it is also serves personal purposes. For example, your dining room is not the exclusive location of your business if your family also eats all meals there. You can’t claim the value of that space in terms of the rent or mortgage paid as a business expense. It’s better to use a separate room. A portion of a room is considered “exclusive,” if inventory or product samples are stored there. This wouldn’t apply to many photographers, except maybe wedding photographers who may have album samples to show clients.
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The term “regular” refers to the use of a specific area of your home for business on a continuing basis. The space does not qualify as a deduction if you operate your business there only occasionally.
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The space in your home that you use for your business must be defined as either your principal place of business; the place where you meet or deal with patients, clients or customers during the normal course of operating your business; or a separate structure (not attached to your home) you use as the designated space for your photography business.
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Determining if your home business space is your “principal place of business” is a bit tricky. As a photographer, especially a portrait photographer, you could have more than one business location. You manage your business from a home office, but photograph your clients in a studio that is leased commercial real estate. Under that scenario, your home office space would qualify, since it is the exclusive and regular place for administrative or management activities of your business. As soon as you start to conduct a substantial amount of these activities at the studio, however, your home office space would no longer qualify.
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Generally, you’re allowed to deduct the proportion of the amounts you pay for rent or your mortgage, insurance, utilities, property taxes, maintenance, etc. that equals the space in your home. If you have a 2,000-square-foot home and use an extra bedroom of 200 square feet, then you can deduct 10% of these costs/expenses.
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You should be aware that there is a limit to the amount of the deduction you can take. If your gross income from the business use is less than your total business expenses, then your deduction for certain expenses for the business use of your home is limited.
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Your deduction of otherwise nondeductible expenses, such as insurance, utilities and depreciation (with depreciation taken last), which relate to the business is limited to the gross income from the business use of your home minus the sum of the following.
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The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A [Form 1040]).
The business expenses that relate to the business activity in the home (for example, business phone, supplies and depreciation on equipment), but not to the use of the home itself.
Of course, your attorney or accountant is your best source for information and interpretation of IRS statues. It’s a good idea to discuss your plans to operate your photography business from your home (totally or partially) with your accountant before you make it your business address.
The information in this PhotographyTalk.com article is general in nature. PhotographyTalk.com does not provide legal or tax advice or imply legal or tax strategies for photography business owners. They should seek such advice from qualified professionals.
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