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Home Office Deduction. How does it work?

Home office deduction. How does it work?
Having a home office can be a great option for deducting expenses. Before we start deducting though, there are a few qualifications that must be met to ensure you are compliant.

Home Office Qualifications

When figuring the home office deduction for a business, we have to consider the following:

  1. Is it truly an office? Can it be used for anything else, such as a sleeping area, workout room, etc.?
  2. What is the square footage of the room and the total square footage of the house? This will give you a percentage of useful area.
    – Office square footage/Total square footage=Deductible %
  3. What does it take to keep the office running? What do I keep track of?
    – Internet
    – Electricity
    – Mortgage Interest
    – Property Tax
    – Repairs and Maintenance

Run the Numbers

The percentage calculated earlier will be the percentage deducted from the business income:

Adding all of the items referenced above and multiplying it by % gives you the expense.

Ex: $9685 X 5% = $484.25 for a business expense

We have an easy to use excel sheet which documents your utility expenses and home office size.

Download the file

Track & Record

Keep track of all your expenses on an annual basis and bring this with the rest of your business information. Please bring the total amounts and not the percentage that is figured. If you have questions, please contact us and we will gladly show you the steps to track your home office.