Home Office Deduction

Do you love to work from home? You aren’t alone. 60% of small businesses without staff are run from home, that’s over 19 million small businesses. By working from home and establishing your home as the primary business location you are opening up an additional business deduction to offset some of your personal expenses.

In order to take advantage of the deduction your business and home must meet two requirements.

1. Regular and exclusive use of the space

2. Principal place of business

What if I use multiple locations for business?

As long as your home is the main location with the majority of your time and business spent at home you may qualify.

What expenses can I expect to write off? Here are some of the expenses that qualify:

• Paint

• Utilities

• Insurance

• Property Taxes

• Mortgage Interest

• Rent

• Security System

Are you ready to start writing off your home here is how:

There are two methods: Regular method and Simplified

Regular Method

This method requires a little math but after the first time the calculations shouldn’t change much year over year. 

• Find the total area of your home

• Find the area of your home office (portion of your home used for business)

• Divide area of your home office/area of your home to determine the percentage of your home used for business purposes

• Multiply the percentage by each expense to find the deductible portion of the expense

If there are expenses associated only with the home office those expenses would be deductible at 100% such as office security and paint for the office.

Simplified Method

This method is an easier calculation:

• Find the area of your home office (limited to 300 sq ft)

• Multiply by $5

• This is the total deduction (not to exceed $1500)

To figure out the best method, book a tax planning engagement.