Whether you are the owner of a home-based business, a virtual worker, or you simply want to establish a space in your home to handle the demands of your off-site business, carving out a home office can help you be more productive at home and maintain your sanity when family and household issues threaten to impede your work. It's important to choose a suitable space and assess your technology needs beforehand so that your new home office is compatible with your needs. The following guide will help you get the most out of your home office setup. 

How to Set Up a Home Office: Design Your Space With You in Mind

The optimal office setup for your business will depend upon your personal and occupational needs, says Cecelia Jernegan, author of Working From a Home Office Successfully: Best Practice Tips. Those with limited space might choose to set up in their bedroom, livingroom or kitchen, while those with a basement or an extra bedroom may choose that space.

Jernegan says that for best productivity, she recommends having a room that is separate from daily household commotion, and one with a door will help immensely. Being able to seclude yourself, in what she refers to as an "office frame of mind," has to be a conscious decision, she says, and your work environment should be a reflection of you.

"If you're a bachelor with no kids, obviously your setup differs from a mom who's got three kids," Jernegan explains. "[Conversely,] if you have your home office set up in your bedroom, and you have clients visiting every week, that's not very helpful."

Leigh Buchanan, Inc.'s editor-at-large, who works from her home office in a suburb of Boston, adds that auxiliary elements, such as additional storage space and lighting, should also be taken into consideration. "You will have a tendency, when you work from home, to pile stuff up on the floor, which is not good because people can trip and fall," she says. "I think it's a good idea to have a basement, closet, or some place that you can dedicate to archives."

Buchanan also emphasizes the importance of computer placement by sharing a bothersome home office anecdote of her own: "Be careful where you're putting your monitor," she warns. "I made a huge mistake of putting my monitor in front of a window so I can see the trees, which is nice, but from 3 pm to 3:30 pm, the sun shines directly in my face."

Dig Deeper: There's No Office Like Home

How to Set Up a Home Office: Getting the Right Tools and Services

According to Jernegan, comfort and functionality are significant characteristics of a productive home office, and the type of equipment you buy, not to mention where you buy it from, is essential to workplace efficiency.

For many people who work from a home office, a desk, a chair, a computer with a working Internet connection, a printer, and a phone line with voicemail will suffice. Some entrepreneurs may need a fax machine, some may need more space or several monitors for design work, and some may find multiple phone lines with caller identification to be helpful.

"Your equipment should be ergonomically sound, because you are going to be working on it for hours," Jernegan advises. Hours of work inevitable leads to breakdowns. Thankfully, most hardware providers, particularly computer hardware, comes with user maintenance or warrantee agreements. "In an office, people will fix your equipment for you when it breaks down. But you need to make sure that you can fix your own equipment at your home office, [or] get vendors that are available 24 hours."

Jeff Zbar, home office expert and operator of ChiefHomeOfficer.com, also stresses the importance of buying and hiring locally for all of your IT needs. "Find someone in your local area, within 40 miles," he says. "Then, if something breaks down you will have easy access; they can come to you or you can go to them. It helps to support your local community by buying local, and [your local IT help] will always be there."

When choosing an Internet provider, Jernegan also advocates exploring local options, and making sure that your area will receive sound access and reliable customer service before you commit to a plan: "You don't want your service going down all the time. If your Internet is out for three hours, that affects your income and your business."

Zbar insists that launching a home office does not have to be expensive. "My first home office, which I created in 1989, had a desk made out of an eight-foot kitchen counter top, which I bought at Home Depot," he says. "It was a makeshift office and it cost me practically nothing –the point being, it was a perfectly functional office to get done what I needed to be done."

"One thing I would say to invest in is the chair," Zbar adds. "It's important to constantly adjust your chair, because your posture changes all the time. You can get a good chair for about $150 on up."

Dig Deeper: Essential Tools For Every Home Office

How to Set Up a Home Office: Determining Whether You Qualify For Tax Deductions

Zbar points out that if you operate an office out of your home, you are not required to declare it on your taxes.  However, you may qualify for any number of tax deductions depending on various IRS stipulations. In order to qualify for deductions, you have to use the space in your home regularly and exclusively for your own business purposes. Unfortunately, if you are a telecommuter or virtual employee with an employer, and your employer helps cover some of the costs of your home office, you will not qualify for deductions.

You may also deduct a portion of expenses that are related to your home office, such as the percentage of square footage that accounts for your home office within your entire living space, your dedicated business phone, and internet service. Nonetheless, some important facts to remember are that your business must be profitable in order to qualify for a home office deduction, and your annual tax write-off cannot exceed your annual business income.

Dig Deeper: Deducting Your Home Office Expenses

How to Set Up a Home Office: Always Have a Backup Plan

No matter how proficient you think your software or hardware is, Jernegan says, it is important to "have a backup plan in case things go to hell in a handbag." She suggests limiting food and drinks around office equipment as an easy way to help safeguard your office tools, but says that technology snafus in general are nearly unavoidable.

There are plenty of questions you will ask yourself when your Internet, or your computer fails you, Jernegan says: "Do you go to the library? Do you go to Starbucks? If you don't have a car that day, where do you go?"

Correspondingly, Zbar says the key is to always have fallbacks, and while he works from a desktop computer in his home office, he says he has taken steps to ensure that he will never be totally vulnerable to IT failure. "I believe in redundancy," he says. "I have my laptop, so I'm never really down. If my Internet goes down [at home], I have an aircard, so I can still get online whenever; it's about $40 a month, which is costly, but I need it."

Being overly prepared is just another characteristic you will develop when you work from home, Zbar says. "You always have to be ready to put on the IT hat, the CEO hat, the CFO hat, or the CHO (Chief Home Officer) hat," he says.

Dig Deeper: Checklist: Research Your Backup Solution Options


For more information on running a home-based office, check out Inc.'s Home-Based Business Start-up Guide.

To find out if you qualify for home-office deductions, the IRS has a comprehensive list of prerequisites.

Inc. offers advice on setting up your Home Office Technology.