Home Office Tax Deductions

Small business owners can deduct a portion of the costs of their home if it is used for business. To deduct the "business use of home" expense, a taxpayer must regularly and exclusively dedicate a portion of their home as either:

• The principal place of business and/or
• Exclusively as the place to interact with customers, patients, or clients in his or her regular business operations, or
• In direct association with your business (if he or she utilizes a structure that is not attached to their home or residence).

There are two types of expenses related to a home office:

1. Direct Expenses Expenses related exclusively to the business are fully deductible. These can include things like, business insurance, general repairs, improvements, service or maintenance to facilitate business operations.
2. Indirect Expenses The percentage of general home expenses attributed to the operations of the business, otherwise known as the "Business Use Percentage." This is the square footage of office/total finished square footage of home or apartment. If your business is 20% of your home you can deduct 20% of your home bills.

Indirect expenses can include the following:

• Mortgage interest
• Real Estate Taxes
• Depreciation
• Rent
• Utilities (gas, electric, heat, water, and sewer)
• Insurance (Homeowner's)

Simplified Option For Home Office Deductions

Home Office Deduction Calculator

Expenses Related To Home Office Are Deductible

Tax Form 8829 for claiming Home Office Expenses

Post Updated April 19, 2015