Deducting Home Office Expenses

Home Office

The evolution of remote work has transformed our homes into multifunctional spaces, blurring the lines between personal and professional domains. Amidst this shift, the opportunity to deduct home office expenses has become a crucial aspect of financial planning for many. Understanding the intricacies of these deductions can lead to significant savings. Here’s a summarized guide to the process.

Eligibility:

The IRS specifies two main criteria for claiming home office deductions:

  • Regular and Exclusive Use: The space claimed must be used regularly and exclusively for conducting business.
  • Principal Place of Business: Your home office must be your primary place of business or used for meeting clients or customers regularly.

Simplified vs. Regular Method:

  • Simplified Method: Introduced in 2013, this method offers a flat-rate deduction of $5 per square foot, up to a maximum of 300 square feet, simplifying the calculation process.
  • Regular Method: This approach involves detailed record-keeping and allows deductions for a percentage of your home expenses including mortgage interest, utilities, insurance, and property taxes, based on the proportion of your home used for business. 

Qualified Expenses:

  • Direct Expenses: Costs incurred solely for the home office, such as painting or repairs in the specific office area.
  • Indirect Expenses: Shared expenses applicable to the entire home, prorated based on the office’s square footage. This includes mortgage interest, utilities, insurance, and maintenance.

Keep Detailed Records:

Accurate record-keeping is paramount. Maintain records of expenses, receipts, and documentation showcasing the business use of your home office, such as photographs or floor plans designating the office space.

Depreciation:

For homeowners, depreciation of the portion of the home used for business may also be deductible – but let us help you understand the consequences of depreciating your home. 

Seek Professional Advice:

Kids, don’t try this at home!  Tax laws surrounding home office deductions are complex. We provide proactive and valuable guidance, ensuring you can maximize eligible deductions while complying with IRS regulations.

Want your business to be successful? Our team can help