I Took the Home Office Tax Deduction

Entrepreneurialism

Mar 13

I’ve been in business for eleven years and this is the first time I’ve taken the home office tax deduction.

The majority of the time I’ve been self-employed I rented an office outside of my home and was able to directly write off my rent, internet, and insurance payments.

But I left my studio office at the end of 2023 and so I’ve finally been confronted with figuring out the home office deduction. While it’s not nearly as high as when I rented (I’m saving quite a bit of money, after all!), it’s still worth claiming.

Qualification

To qualify for a home office tax deduction, your office must meet the following criteria:

A dedicated space

A separate room is not required; a small space or corner within a room works, too. For example, a desk in the corner of your living room counts if the desk is only used for business. Your kitchen table does not meet the criteria because you use it for non-business purposes.

Primary place of business

You run your business out of this space the majority of the time.

Two deduction options

The home office deduction is meant to factor in your business’ share of your mortgage or rent, insurance, taxes, utilities, security systems, etc.

When claiming the home office tax deduction, you can itemize these expenses or choose the simplified method.

Actual Expenses Method

This requires more time, tracking, and math.

You first calculate what percentage of your home is used for business, then divide your costs (mortgage, utilities, insurance, etc.) between business and personal use.

Any direct cost related to your office space can be deducted at 100%, such as repairs to the office space.

There are limitations to this method. A home office deduction cannot cause your business to have a loss. If it does, you apply the difference to a future tax year when you have a profit.

IRS Publication 587 covers this more in depth.