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Home Office Deductions

Updated: Aug 12, 2019


Business owners who use an area or room in their home as an office may be eligible to claim the home office deduction. This deduction allows certain home expenses to be applied against the income to reduce taxes.



Eligibility

To be eligible for this deduction you must take part in the following:


Have a Home: a house, apartment, condo, mobile home, etc. that may have additional structures like an unattached garage, studio, barn, greenhouse, pool house, etc. and do not include any part of property used exclusively for a rental; for example, a hotel, motel, or similar.


Your Home Must Meet 2 Requirements:


1. The designated area, room, or portion of your home is exclusively used for business on a regular basis. Example: The 3rd bedroom in the home is set up and used for business only on a regular basis.

2. This area designated in the home is the principal and only place of business where office, admin, and management activities are conducted. This includes the separate structures on the property if they are used regularly for business only. Therefore, the business does not have any other local offices outside the home.


Types of Home Office Deductions

Being that the home office deduction can be used by individuals who own or rent their home, they can expense their mortgage interest or rent, insurance, repairs & maintenance, utilities and depreciation in one of two ways:


Simplified

This option is given at a rate of $5 a square foot for business use of the home. The maximum size allowed in this calculation is 300 square feet and the maximum deduction is $1,500.

Regular

This is based on the percentage of the home devoted to business use. This could be part or whole room in the home. The percentage of the home used for business can be deducted as indirect expenses. Any expenses directly used for the business can be deducted in full.

For example: The area or room used for business is 250 square feet. The total home is 1,000 square feet. This means that 25% of qualifying home indirect expenses can be deducted.


If you have questions, or want more information on this topic, you can contact The HOPE Accounting Firm at 216.744.9303 or at contact@hopeaccountingfirm.com. This information is also available through the IRS website at www.IRS.gov.



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