Taxpayers can take the home office deduction if they use a portion of their home regularly and exclusively for business. That portion of their home could be the taxpayer’s main place of business, a place where the taxpayer meets patients, clients or customers in the normal course of business, or a place to store inventory or samples. It can also be a separate structure that is not attached to the taxpayer’s home (such as a garage or barn) as long as it is used regularly and exclusively for business.
Taxpayers can claim the deduction whether they are a homeowner or a renter. It can be used for a house or apartment, but not for a hotel or other temporary lodging.
There are two options for figuring and claiming the home office deduction:
● Regular method: direct expenses (such as repairs solely in the home office) are deducted in full, while indirect expenses (such as the home’s mortgage interest, rent, utilities, insurance, real estate taxes, repairs, and depreciation) are deductible based on the size of the home office as a percentage of the entire home.
● Simplified method: If the home office is 300 square feet or less, the taxpayer deducts $5 per square foot of the home office, up to a maximum of $1,500 for a 300-square-foot space. The simplified method reduces the paperwork and recordkeeping for small businesses.
The home office deduction is presently only for self-employed taxpayers. Between 2018-2025, employees cannot deduct home office expenses. (Prior to 2018, employees could deduct home office expenses under miscellaneous deductions subject to the 2% floor, including unreimbursed employee business expenses.)
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