More and more American workers are investing in a home office. An estimated 20 million households have income-producing home offices this year, compared with 18 million last year and 15 million the prior year.
There are many reasons for this work-at-home trend. A million jobs have been lost at the Fortune 100 firms in the past decade. Entrepreneurship is on the rise due to a change in lifestyle goals. In addition, it's no longer financially prohibitive to set up a home office and more people now know how to use the necessary equipment.
Nearly a quarter of individuals working out of their homes are in construction trades, but there's also a significant portion in financial services and various forms of consulting. Beyond that, virtually any type of business you can dream up is handled from a home office somewhere.
"I work out of my home for convenience first and comfort second, and find it much less expensive than the office I had been renting, which was little more than a status symbol," said Bradford Charnas, a Brecksville, Ohio, real estate appraiser working out of an office in his finished basement for more than a year.
"The fax machine has alleviated much need for express mail, and I also have a letter quality printer, a laser printer, an answering machine, a copying machine and computers for myself and my secretary."
You can build a complete home office for around $3,500, according to Bernadette Grey, editor of Home Office Computing magazine, 730 Broadway, New York, N.Y. 10003. She recommends a personal computer containing a 386 computer chip (more powerful than a 286 chip and able to run more software applications) for around $2,000; a fax for $500; a copier for $500; and an ink jet printer for $400. A laser jet printer would start at around $800.
"The time to get a fax is when your first potential important client asks you for your fax number," said Grey. "To handle bookkeeping properly, you need some good accounting software, such as Managing Your Money published by MECA, or Quicken by Intuit Inc." Subscribers to Home Office Computing magazine receive a pamphlet titled Twenty Tips for Building your Home Business. Annual magazine subscription rate is $16.97.
"While people build home offices gradually, they usually under buy when it comes to computers and, after a year, kick themselves," said Raymond Boggs, director of home office research for BIS Strategic Decisions, Norwell, Mass. "Get a computer with as much memory as you can possibly afford."
Before doing anything, check any local legal constraints, such as zoning regulations which might prohibit a home business, advised George Solomon, director of the Office of Business Education and Resource Management for the Small Business Administration.
The SBA through its national or regional offices for $1 provides a detailed 21-page pamphlet titled The Business Plan for Homebased Business.
Even though you're at home, be sophisticated about your office. Find a work space that's well-lit and quiet, away from household noise. And take taxes seriously.
"Most of our clients who run home businesses don't realize how important it is to keep accurate records in order to get the proper number of deductions," said Stuart Kessler, chairman of the personal finance planning executive committee of the American Institute of Public Accountants.
The IRS, Kessler points out, permits you to deduct any expenses of the use of a home for business purposes if they're attributable to a portion of the home used exclusively on a regular basis as either: (1) the principal place of business carried on by you, or (2) a place of business used by patients, clients or customers dealing with you in a normal course of business. IRS publication 587, titled Business Use of Your Home, lists deductible home-office items.