How to deduct my home office expenses.
For someone who is considering claiming the home office deduction, there are two options available:
Regular Method
This method requires calculating the business use of the home by dividing home operating expenses between personal and business use. Direct business expenses are fully deductible, and the percentage of the area space used for the business is assignable to the total indirect expenses. Business owners file Schedule C, Profit or Loss From Business, and calculate this deduction on Form 8829, Expenses for Business Use of Your Home.
Simplified Method
The second option, the simplified method, reduces paperwork and the record-keeping burden. It has a prescribed rate of $5 per square foot for business use of the home. There is a maximum allowed deduction limited to 300 square feet. Choosing this option requires taxpayers to complete a brief worksheet in the tax instructions and enter the result on the tax return.
You can find more details about the home office deduction and the simplified method in Publication 587, Business Use of Your Home, on IRS.gov at: https://www.irs.gov/publications/p587
Author: Carlos Nazario CPA JD your TAX-Man. All rights reserved.