Living At The Office

Workstation: Americans increasingly are working from offices in their homes, a trend helped by a recent IRS ruling.

March 23, 2003|By Patricia V. Rivera | Patricia V. Rivera,SPECIAL TO THE SUN

Art consultant Catherine Evans tried the traditional approach to running a business.

The owner of Catherine Evans Fine Art in Phoenix and the mother of two rented space in a central office building for her company. But she wanted to be closer to her young children during the workday.

"It became problematic, so I started working from home," Evans, 48, said of her decision 10 years ago. "I found it so much more convenient to be able to efficiently work as a family person and a businessperson."

Almost 20 million people worked at home during some part of the week in 2001, according to the latest figures available from the U.S. Bureau of Labor Statistics.

Those people who reported working from home at least once a week accounted for 15 percent of the nation's total employment. And experts predict the numbers will grow as technology makes it even easier to connect with the office.

The growing interest in using home space for offices and businesses is attributed to a variety of factors, experts said.

Most notable is the improved technology. But downsizing during a slowing economy also prompts more people to pursue entrepreneurial activities that often are based at home, according to the National Association of HomeBuilders.

Also, the 2001 terrorist attacks, and anxiety about future assaults, promoted greater interest in telecommuting as more people reassessed their work-life balance, experts said. And new tax laws have loosened deductions for those who have sold homes that contained home offices.

"Everyone now wants a room they can turn into an office," said Gina Gargeu of Century 21 Downtown in Baltimore.

But they may not always be able to purchase what they envision. Buyers of homes selling for about $165,000 may have to use an extra bedroom for an office, particularly in older homes, Gargeu said. New homes with a value of at least $350,000 typically have office space with appropriate wiring.

The national builders' group found in a 2000 survey that 66 percent of buyers of new homes said they would use an extra bedroom as a home office. It placed second to using the space as a guest bedroom.

Also in the study, 44 percent of households said they had a separate room dedicated to a home office. More homeowners add offices as they grow older during their work years, according to the study.

The survey, titled "What 21st Century Home Buyers Want," included responses from 1,180 consumers nationwide who were planning to purchase a house or had bought a new home during the past two years.

Flexibility remains important when designing an office, experts said. A room used as an office today could become a game room or extra bedroom for the next owner.

Variations of the office - known as dens, studies and libraries - have been around since homes have been built. Today's sophisticated work spaces, however, require much more.

"People used to work out of the guest bedroom, but not anymore," said architect Laura Melville Thomas of Baltimore, who is designing an office in the new home Evans is building on a 15-acre site a few miles from her current home.

"They have a sense that they can get work done at home and they want elements of a real office. They think through everything, and they're looking for things like storage, filing capacity, nice light, nice windows."

For Evans, lighting is crucial to her work. So Thomas designed a studio with huge windows above the garage.

"Inside the space, it's a masterpiece of light," Evans said. The cost of the studio alone will be close to $155,000. Construction is expected to be completed in the summer.

Less stringent tax requirements are making it easier for people who truly work from home to file for a deduction if they sell the house.

The Internal Revenue Service once dictated that taxpayers who wrote off a portion of a property's value as a home office would lose the residential exclusion on that portion of the gain from a sale.

In other words, if 10 percent of the home was used as an office and the home was sold at a $100,000 profit then $10,000 of the gain would be taxable.

As of last year, taxpayers can exclude as much of their home-sale profit as the law allows as long as the office is in the same dwelling - not in a separate guesthouse or garage.

Jeffrey D. Baer, a Baltimore certified public accountant, said the tax change has made offices in homes more appealing. Many others who don't qualify for the deduction are establishing them anyway.

"As people are working more from home, opening small businesses and leaving corporate jobs, they're definitely looking for that break," he said.

The law clearly states, however, that taxpayers can deduct a home office only if it's a primary place of doing business. If someone telecommutes for their convenience, say, to eliminate a commute or improve work-life balance, they don't qualify for a deduction.

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