Home Office Deduction
Business Use of Your Home
If you use part of your home for business, you may be able to deduct expenses for the business use portion of your home. For taxable years starting on, or after, January 1, 2013, there is now the option to choose the simplified option or the regular method for computing the business deduction.
The simplified option allows for a standard deduction, if a portion of a residence is exclusively used on a regular basis for business purposes. This method can significantly reduce recordkeeping by allowing a qualified taxpayer to take a deduction of $5 per square footage of the home office space without exceeding 300 square feet.
The regular method for computing the home office deduction uses the total annual household expenses multiplied by a percentage based on the business use square footage. In order to use this method, records of expenses are required to be maintained. Listed below are examples of the most frequently used expenditures:
- Home owners insurance
- Homeowner Dues
- Natural Gas and/or Heating Oil
- Water / Sewer
- Trash Removal
- Selected Land Line Telephone
- Internet Service Provider
To determine the portion of home business use deduction allowable, divide the total square footage of your home as compared to the exclusive business use portion of your home. Visit the IRS.gov website and review Publication 587 for additional information.
To qualify for the Home Office Deduction you must meet a two (2) part test (both methods):
1. The business part of your home must be exclusively and regularly used for your trade or business.
2. The business part of your home must be used for your principal place of business.
Contact our firm with questions regarding the deduction methods or how to calculate the business use portion. Our staff will be happy to assist you.