Home Business Deductions and Asset Tracking

One of the greatest concerns for home business owners next to whether they can keep their doors open is whether they are taking the proper deductions. The IRS is not the most forgiving branch of the government, and it can be quite rattling to know that you could make a mistake that might get you audited.

Part of the reason for this fear is that it is such an uncertain area of the law. No one is quite sure what one does to get noticed or audited. There are red flags that go up from time to time, but sometimes the choice appears to be quite random. The one exception, of course, is when you are doing something illegal, but, presuming that you aren't, there are some things you can do to help yourself rest easier when it comes to taking a home business deduction.

The Catch of the Home Business Deductions

The home business deduction that causes the most concern is the home office space itself. According to the current laws, the IRS requires that your business deductions be for items that are exclusively used for business. The same is true for the portion of the house you claim as the office. If the exclusive use is not for business, you can't claim it. In other words, if you work out of your living room on the couch where you watch TV and entertain guests, then you're out of luck.

There is, however, one loophole that you can use. The home office deduction can be claimed if there is a specific area. The entire room does not have to be the home office. It could just be a corner. Everything in that corner must be related to the business and exclusive to the business if you are going to claim them as deductions.

Demonstrating the Business Purpose

While that all may be well and good, the other concern that stems from this is how to prove it. It's tricky because when your equipment isn't in a separate room or office, it may look as if it is just part of the personal items in the home. Proof with the IRS can be a tricky matter. They do not follow the typical laws of evidence. However, you can help protect yourself in a couple ways. The first is to categorize every business deduction you make correctly. For office equipment, this can be partially accomplished through asset inventory software. Through this, you can identify the piece of equipment, its location, its details, and its uses. You can then designate it as being office equipment. While this alone will not be enough to convince the IRS, it is a significant step in demonstrating the consistency of your position. Additionally, the burden of proof is still on the IRS's shoulders in most cases to demonstrate that your office equipment is not used exclusively for office equipment. Asset Panda is one of the easiest programs for accomplishing this. The inventory software downloads straight onto your computer, and you can be up and cataloging within minutes. Additionally, it lets you sort your assets and categorize them by room or space. This is perfect for a home business that needs to demonstrate the purpose of the item through asset inventory software.

Removing the Distractions

The other thing that you need to do is get rid of anything that looks as if your equipment is not being used for business purposes. This means that there should be no games or extra items on any of the devices. You may even want to go so far as to remove the games that come with the system automatically so you can demonstrate that it is not being used for anything except work.


Krista has developed a passion for operational strategy via KPI management, streamlined processes, implementation of automation systems, and scaling Asset Panda. When she isn't attempting to help take the company to new heights, she enjoys spending time with her family, gardening, playing golf, cooking, and a good glass of wine.

Learn more from an Asset Panda expert

Get a FREE consultation with an asset tracking expert to find out how you can transform your asset tracking