Working from home? You may qualify for a home office deduction. With more people working remotely, this deduction has become increasingly valuable. Here's what you need to know.
Requirements
Your home office must meet these criteria to qualify:
- Used regularly and exclusively for business
- Your principal place of business
- Where you meet with clients or customers, OR
- A separate structure not attached to your home
Note: You cannot use this deduction if you work from a shared space or occasionally work from home.
Two Calculation Methods
Simplified Method
$5 per square foot, up to 300 sq ft (maximum $1,500/year)
Easier to calculate and less IRS scrutiny. Good for most home office situations.
Regular Method
Calculate actual expenses and allocate to your office space
More complex but can yield higher deductions for larger offices.
Deductible Expenses (Regular Method)
Direct expenses (100% deductible):
- Office furniture and equipment
- Office supplies
- Equipment repairs (desk, chair, shelving)
Indirect expenses (prorated based on office size):
- Mortgage interest or rent
- Utilities
- Internet and phone
- Home insurance
- Repairs and maintenance
- Depreciation
Example Calculation
Home details: 2,000 sq ft home, 200 sq ft home office (10%)
Annual mortgage interest: $8,000 × 10% = $800
Annual utilities: $2,400 × 10% = $240
Office furniture/supplies: $500
Total deduction: $1,540