No-Biz Laws & Zoning Often Keep Home Office Workers Quiet

Home-based business owners often are shadow entrepreneurs. They run successful businesses, pay permit fees, taxes and insurance, and appear legitimate to their customers, clients and other outsiders. The thing is, many operate covertly when it comes to admitting their existence within cities that often ban their very existence.
As the number of home-based workers grow, they are facing an increasingly common dilemma: many cities' zoning rules ban home offices. To some city leaders, the existence of home-based businesses in residential neighborhoods is mistakenly considered by some the first step toward larger business enterprises moving into the area.

City leaders blame perceptions of increased neighborhood traffic, mixing of residential and business use, or simply a refusal to change often decades-old ordinances.

Often it's not just the city that restricts establishment of home-based businesses in residential districts. Builders and developers, hoping to ensure neighborhood stability, home resale value and the perception that a community is not a magnet for garage-based businesses will write deed restrictions that forbid any home-based enterprises.

Thus, it's important for someone buying a home to read -- or have their attorney read -- the title and city and county ordinances to determine if any restrictions or protective covenants exist. But the need to read may decrease in the coming years. Some cities have seen the light, loosening restrictive ordinances to allow those businesses that have minimal impact on the surrounding neighborhood.

In some cities, resident help city leaders streamline the city's occupational license process. With the rise in home-based workers or telecommuters who split their time between traditional and home offices, city leaders hope to accurately reflect what is happening in the city. What's more, it becomes a source of revenue for cities that charge an occupational license fee for business enterprises that formerly would have gone unnoticed.

Many developers, also sensing the growing demand for offices in the homes -- as either places to run businesses or bring home work from the traditional office -- are designing homes to fit those needs. And they're rewriting restrictions to reflect community demands and more realistic needs.

If city leaders looked closely, they would see home-based business owners/parents involved in community activities, volunteering for school programs or plays, coaching Little League or serving as Cub Scout leaders. Home-based businesses also drive business to other local service providers, including printers and office supply companies.

DO YOU COMPLY? TOE THE SOHO LEGAL LINE BEFORE OPENING A HOME OFFICE:

• Does your city allow the home-based business you're considering opening? Review ordinances at the City Clerk's office to learn what's allowed or restricted. You'll probably need a city occupational license or permit.



• Next, call the county office to inquire about an occupational license or other permits issued by that office.



• Does your development, property deed or title prohibit or restrict home-based businesses? Before buying a home, have an attorney read the deed or title to determine any restrictions or limitations. Same goes for rental homes or apartments.



• If restrictions exist, talk with the city economic development manager, community relations staffer or elected official. Many cities have depressed areas in need of rejuvenation, and can help accomplish the task by facilitating home-based business ventures.

WORDS OF WISDOM: TIPS ON PAYING LESS TAXES

• Make sure the office meets IRS standards for "regular and exclusive" use. That means using an active bedroom as an office during the day likely won't qualify for tax breaks.



• Keep and compile every business-related receipt (from office expenses to meals and entertainment), toll and mile logged during the year. Deductions can add up quickly.



• Deductions on household expenses are allowed up to the fraction of space the office occupies. For example, in a 2,000-square-foot home, a 300-square-foot office would allow deductions of 15 percent. That 15 percent is applied to mortgage interest, property taxes, or rent.



• The office deduction also counts toward otherwise non-deductible items like utilities, homeowners' insurance, security systems, and maintenance, again at the percentage that the office makes up of the entire home. Business telephone lines -- the bona fide business calls made on them -- often are completely deductible.



• If entertaining clients or customers at the home office is allowed by municipal zoning, and you regularly have business-related visitors, certain aspect of home-office upkeep -- including yard maintenance -- might be partially deductible.



• Same for office furniture: If you entertain, keep receipts for items bought to outfit the home office, from furnishings to reasonable decorations.



• Beware concurrency issues, or taking deductions on a home office in a municipality where such businesses are not allowed. Tax advisors say it can be a particularly thorny issue with the IRS.



• Consult an accountant or tax attorney on the benefits of incorporation.

Jeff Zbar, the ChiefHomeOfficer.com, is a speaker, writer and expert on alternative officing. He is the author of Teleworking & Telecommuting: Strategies for Remote Workers and Their Managers (Made E-Z Products, 2002); Safe@Home: Seven Keys to Home Office Security (FirstPublish 2001) and Your Profitable Home Business (on CD-ROM from Made E-Z Products). Visit his Web site to subscribe to Home Office Success Stories, his free electronic magazine on home business and teleworking.