Question: I am running my business from my house. How do I claim a home office deduction on my taxes?
Answer: If you run a small business from home, there are two options for home office deductions available for all types of homes, homeowners, and renters. In order to qualify for a deduction, the IRS states that part of your home must be used as your principal place of business regularly and exclusively.
Regular Method: This method determines actual home office expenses that include areas like mortgage interest, insurance, utilities, and repairs. Use Form 8829 to figure these out and report the deductions on line 30 of Form 1040.
Simplified Option: Also referred to as the Simplified Option for Home Office Deduction, this method allows for the standard deduction of $5 per square foot of the home used for business, up to 300 square feet. If you work out of a space that is larger than 300 square feet, consider using the regular method instead.
This post has been updated for the 2017 tax season.
Are you looking to open a small business? Here are a few more helpful articles from Deborah Sweeney to get you started:
Should I Form a Manager-Managed LLC?
What is an EIN and Why Do I Need One?
Do I Need a Business License?
How to Form an LLC