Home Office Deduction for Self-Employed

Direct expenses of a taxpayer’s home office such as maintenance, repairs, painting, or the addition of furniture, can all qualify for the home office deduction.

Indirect expenses such as utility costs, insurance, real estate taxes can also qualify for the deduction. However, they need to be properly allocable to the home office by dividing the total area of the home by the area of the home office.

Taxpayers may use a simplified option when figuring the deduction, i.e. $5 per square foot up to 300 square feet. Allowable home related itemized deductions can then be claimed in full on Schedule A (Mortgage Interest and Real Estate Taxes).

In order to claim a home office deduction you must pass several requirements.

The home office needs to be your principal place of business and be exclusively used as such on a regular basis. If you have multiple offices, your home office must be considered the most important place of conducting business to satisfy the relative importance test. Also, if you use your home office for any administrative or management activities you may claim the deduction.

Meeting with patients and clients can also entitle you to the home office deduction.

There are certain limitations which are based on the income from the use of the home office. Any expenses that can not be deducted can be carried over and deducted in later years. For further detail on these limitations and any other details please contact one of our professionals.