Home Office Deductions

The home office deduction can be a valuable tax benefit for self-employed individuals who meet specific criteria. To qualify, your home office must be your principal place of business, used regularly and exclusively for business purposes. Exceptions exist for daycare providers and businesses storing inventory at home.

Deductible Expenses:

1. Direct Expenses: Fully deductible; apply solely to the home office (e.g., painting the office).
2. Indirect Expenses: Partially deductible; apply to the entire home (e.g., utilities).

Calculation Methods:

• Simplified Method: Multiply the home office's square footage (up to 300 sq. ft.) by $5. Maximum deduction is $1,500.
• Actual Method: Calculate the business use percentage by dividing the office's square footage by the home's total square footage. Apply this percentage to indirect expenses.

Considerations:

• Depreciation Recapture: If using the actual method, be aware of potential taxable gain from depreciation when selling your home.
• Special Cases: Different rules apply for home daycare or inventory storage.

Consult a tax accountant for personalized advice and ensure accurate record-keeping to substantiate your claims.

If you need your taxes done or need a one-on-one consultant to make sure you have the systems to maximize the tax code..schedule an appointment.