What home office expenses can I deduct?
You can deduct a portion of your housing costs when you use part of your home regularly and exclusively for business. That exclusive part matters. A dining room table where you sometimes answer emails doesn’t qualify. A spare bedroom converted into a dedicated office does.
The space needs to be your principal place of business or somewhere you regularly meet clients. Most small business owners working from home meet this test as long as they have a dedicated workspace that isn’t also serving as a guest room or playroom.
Once you qualify, here’s what you can write off. Mortgage interest or rent, property taxes, homeowners or renters insurance, utilities like electricity and gas and internet, general home repairs and maintenance, and depreciation on the business portion of your home. If you rent, you skip the property taxes and depreciation but everything else applies.
Direct expenses that only benefit your office are 100% deductible. Painting your office walls or adding built-in shelving for business use gets written off entirely. Indirect expenses that benefit your whole home get prorated based on how much space your office takes up.
The IRS gives you two ways to calculate the deduction. The simplified method pays you $5 per square foot up to 300 square feet. That caps your deduction at $1,500 annually no matter what your actual costs are. Easy to calculate and requires minimal documentation.
The actual expense method uses the real percentage of your home dedicated to business. If your office is 200 square feet in a 2,000 square foot home, you deduct 10% of qualifying housing expenses. This method usually produces a larger deduction if you have high housing costs or a larger dedicated space, but you need to track all your home expenses throughout the year.
Run the numbers both ways before deciding. Monthly bookkeeping that tracks housing expenses separately makes this comparison straightforward at tax time. Without good records, you default to the simplified method and potentially leave money on the table.
Keep documentation showing your office is used exclusively for business. Photos of your setup, a simple floor plan, and records of your housing costs all help if questions come up later. For the actual expense method, you need receipts or statements for every expense you claim a portion of.
The home office deduction is one that business owners frequently underestimate or miss entirely. Having a bookkeeper for small business who understands what you can deduct ensures these expenses get captured and documented properly instead of slipping through the cracks.
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