A home office deduction may be available for taxpayers who run a business from home or are self-employed and use part of their home for business purposes. The home office deduction is available to both homeowners and renters. To qualify, the home office generally must serve as the primary place of business, though exceptions exist. The space must be used exclusively and regularly for business purposes, with no personal use permitted.
Taxpayers may deduct mortgage interest, insurance, utilities, repairs, maintenance, depreciation, and rent. However, they must meet specific requirements, and the deductible amount may be limited.
For this deduction, “home” encompasses a house, apartment, condominium, mobile home, boat, or similar property. It also includes structures on the property, such as an unattached garage, studio, barn, or greenhouse. However, it does not apply to any part of the taxpayer’s property used exclusively as a hotel, motel, inn, or similar business.
Home office business expenses are categorized into direct and indirect expenses. Direct expenses are those specific to the home office, such as furniture, equipment, and supplies, and can be fully deducted on a tax return. Indirect expenses, like utilities, rent, insurance, and security system fees, are not exclusive to the home office. The deductible portion of these costs is calculated by dividing the home office’s square footage by the home’s total square footage.
Eligible taxpayers have two methods to calculate their home office expense deduction. The simplified option allows a deduction of $5 per square foot of business use, with a maximum of 300 square feet, capping the deduction at $1,500. Alternatively, the regular method calculates deductions based on the percentage of the home used for business purposes. Those using an entire room or part of a room for business must determine the percentage of the home dedicated to business activities to deduct indirect expenses. In contrast, direct expenses can be deducted in full.
Employees working from home can no longer claim the home office deduction on their federal tax returns. The Tax Cuts and Jobs Act removed this deduction for employees from 2018 to 2025, along with other unreimbursed employment-related expenses. Contact your tax manager/partner at 610-687-1600 or [email protected] for additional information.
Author Martha Eckhardt, EA, is a highly skilled Senior Tax Manager and Office Manager at Stephano Slack’s Haddonfield office. With a sharp focus on individual tax compliance, Martha excels in handling complex multi-state cases and serving high-net-worth clients. Her expertise includes managing trusts, preparing gift tax returns, and overseeing private foundations’ 990-PFs. Additionally, Martha brings specialized knowledge in Expat tax returns and associated Equalizations. For personalized tax solutions, reach her at 856-528-5386 or [email protected].
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