Home Office Tax Deduction

If you’re working from home like hundreds of others you might be able to claim the home office tax deduction. However, if you’re considered an employee, you will not qualify.

If you’re an independent contractor or work for yourself you can claim the home office deduction. But you must have a designated space in your home. You can claim up to 300 square feet, which is a pretty sizeable area if you think about it.

Some things to consider before taking the Home Office Tax Deduction

Sale of a home – You might not be taxed for the home office portion. That will depend on whether the home office was within your home or a separate building on the same property. It also depends on how you filed your deductions.

For example, let’s say you have a designated spot in your home as your home office. You won’t be taxed on the space when you sell your home as long as you didn’t also claim the depreciation expense for that space.

However, if you do claim depreciation and/or have a separate building that is designated as a home office on the same property you will be taxed at the time of sale.

There are two ways to go about claiming the home office deduction.

The Standard Option

With this method, you’ll deduct your actual home office expenses plus a percentage of your home expenses. For example, if the square footage of your home office is 10% of the finished square feet of your home, then you can deduct 10% of your mortgage, utilities, and other house-related costs including depreciation as part of your home office.

The Simplified Option

A simpler option would allow you to claim up to 300 square feet of your home at $5 per square foot. This would give you a maximum deduction of $1,500. With this option, you certainly don’t have to worry about collecting a lot of information since this really streamlines the process.

FAQs about the Home Office Tax Deduction