Oh. I responded to your question around the same time you posted the second part of your question.

When you moonlight and receive a 1099-Misc, claiming professional expenses directly against that income is one of the best ways to minimize your tax bill on that income. You can find a listing of professional expenses commonly incurred by your colleagues at:

http://www.mdtaxes.com/mdbusexp.html

One expense we see quite a bit is the home office deduction. You'll claim that deduction directly against your 1099-Misc income on the Schedule C.

Is claiming the home office a red flag? If you use a portion of your home on a regular basis in connection with performing administrative tasks for your moonlighting income, then you'll need to document both things if you ever get audited.

Zip Code: 01801

When you work and earn money as an employee, you claim the home office deduction as a miscellaneous itemized deduction. You will only benefit from this deduction if your total itemized deductions exceed the standard deduction. For 2008, the standard deduction for a single individual is $5,450.

As you mentioned, since rent isn't otherwise deductible on your federal income tax return, claiming the home office deduction does make a portion of your rent tax deductible. However, there are specific rules determining if you can claim the home office deduction. Unless you're self-employed, you can only claim this deduction if maintaining a home office is 1) a Requirement of your employment and 2) for the convenience of your employer.

If your income will only be $15,000, you might be able to bring your tax liability down to zero by taking advantage of the Retirement Savings Credit. On $15,000 of income, I calculate that your federal tax liability will be $605 if you claim the standard deduction and can claim yourself as a dependent.

You can easily offset that tax liability if you qualify for the Retirement Savings Credit and contribute some money into your IRA or employer sponsored 401k plan.

Zip Code: 01801