Home Office Deduction Options

No matter which option you select to qualify as a deduction your home office must meet two requirements. Thanks to a tax law change back in 2013 there are now two methods for claiming this deduction. It must be used both regularly and exclusively for business purposes.

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The actual expenses method and the simplified method.

Home office deduction options. The home office deduction is for self employed business owners. In general you ll qualify for a home office deduction if part of your home is used regularly and exclusively as your principal place of business. It merely simplifies the calculation and recordkeeping requirements of the allowable deduction. For taxable years starting on or after january 1 2013 filed beginning in 2014 you now have a simplified option for computing the home office deduction irs revenue procedure 2013 13 january 15 2013.

If you opt for the general method using form 8829 expenses for business use of home the first task is to calculate the percentage of business use to do this you divide the square footage of your office space by the total square footage of the home. These include allocable share of internet fees. Basics of the deduction. New home office expenses option.

The standard method has some calculation allocation and substantiation requirements that are complex and burdensome. How to calculate your home office deduction. Highlights of the simplified option. Posted on may 16 2018 in deductions home office income tax.

The irs introduced a simpler option for deducting home office expenses in 2013. This simplified option does not change the criteria for who may claim a home office deduction. If you choose the simplified option use the simplified method worksheet from the schedule c instructions and then write the value of your deduction on line 30 of schedule c. New home office expenses method.

Instead of keeping records of all of your expenses you can deduct 5 per square foot of your. Your deduction would be 2 000 meaning that you have just saved 2 000 by claiming a home office expense deduction. For example let s say your total allowable indirect home expenses for your whole home are 20 000 for a specific year and your home office space is 10 of your home for business purposes. There is a new option for calculating home office expenses for small business owners which might be attractive to some business owners.

How you claim the home office deduction on your taxes will depend on which method you use to calculate your deduction. It must be your principal place of business and. Standard deduction of 5 per square foot of home used for business maximum 300 square feet. In simple terms home office tax deduction allows taxpayers to deduct a portion of expenses related to carrying out your business from home.