Top IRS Tips to Know about the Home Office Deduction
Taxpayers who use their home for business may be able to deduct expenses for the business use of it. Qualified persons can claim the deduction whether they rent or own their home. Use the simplified method or the regular method to claim a deduction.
Here are six tips to keep in mind about the home office deduction:
1. Regular and Exclusive Use. Generally, taxpayers must use a part of their home regularly and exclusively for business purposes. The part of a home used for business must also be:
- A principal place of business, or
- A place where taxpayers meet clients or customers in the normal course of business, or
- A separate structure not attached to the home. Examples could include a garage or a studio.
2. Simplified Option. To use the simplified option, multiply the allowable square footage of the office by a rate of $5. The maximum footage allowed is 300 square feet. This option will save time because it simplifies how to figure and claim the deduction. It will also make it easier to keep records. The rules for claiming a home office deduction remain the same.
3. Regular Method. This method includes certain costs paid for a home. For example, part of the rent for rented homes may qualify. For homeowners, part of the mortgage interest, taxes and utilities paid may qualify. The amount deducted usually depends on the percentage of the home used for business.
4. Deduction Limit. If the gross income from the business use of a home is less than expenses, the deduction for some expenses may be limited.
5. Self-Employed. Taxpayers who are self-employed and choose the regular method should use Form 8829, Expenses for Business Use of Your Home, to figure the amount to deduct. Claim the deduction using either method on Schedule C, Profit or Loss from Business. See the Schedule C instructions for how to report the deduction.
6. Employees. Employees must meet additional rules to claim the deduction. For example, business use must also be for the convenience of the employer. If qualified, claim the deduction on Schedule A, Itemized Deductions.
All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.
Additional IRS Resources:
- FAQs – Simplified Method for Home Office Deduction
IRS YouTube Videos:
- Home Office Deduction for Daycare Providers (Simplified Method) – English
- Home Office Deduction for Schedule C Filers (Simplified Method) – English
- Home Office Deduction for Schedule F, Employee, Partnership Filers (Simplified Method) – English