If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes. There are a few requirements to claim a home office deduction.
Regular and Exclusive Use: You must regularly use part of your home exclusively for conducting business
Principal Place of Your Business: You must use your home as your principal place of your business. If you conduct business at a location outside your home, but also use your home substantially and regularly to conduct business, you can qualify for a home office deduction. If you use a separate free-standing structure, such as a garage, barn or studio exclusively and regularly for business, you can qualify for a home office deduction.
Additional Test for Employees: If you are an employee and you use part of your home for business, you can qualify for a home office deduction. You must meet the the requirements discussed above plus:
Your business use must be for the convenience of your employer, and
You must not rent any part of your home to your employer and use the rented portion to perform services as an employee of that employer.
If the use of your home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.
You can figure your home office deduction using either the Simplified Method or the Regular Method.
Under the Simplified Method, you take a home office deduction by multiplying the number of square feet of your home office (300 maximum square feet allowed) times $5.00 per square foot. Thus, the maximum possible deduction is 300 X $5.00 = $1,500. Under this method, the actual expenses of running your home are not taken into account.
Under the Regular Method, you take a home office deduction by multiplying the percentage of your home devoted to business use times the various expenses of running your home, such as mortgage interest, real estate taxes, insurance, maintenance, repairs, and depreciation.
This article was written by Donald M. Scherzi, CPA, CFP, LLC
Mike Lupo, SCORE Counselor
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