For many small business owners, freelancers, and remote workers, the home office is a crucial part of daily operations. But did you know that if you use a portion of your home exclusively for business, you may be eligible for a home office tax deduction?
At Basso & Guida, we help business owners and self-employed individuals maximize their deductions while staying compliant with IRS rules. Here’s what you need to know about claiming the home office deduction and how to ensure you qualify.
1. Do You Qualify for the Home Office Deduction?
The IRS allows you to deduct expenses related to your home office if:
- The space is used exclusively for business purposes (not a shared space like a kitchen or guest room).
- It is your primary place of business (where you conduct most of your work, meet clients, or manage operations).
Common examples of qualifying home offices:
- A dedicated room in your house used for work (not personal activities).
- A separate structure on your property, like a detached studio or garage, used for business.
- A designated corner or section of a room that is solely used for business operations.
What doesn’t qualify?
- A kitchen table that doubles as an office.
- A guest room used for both work and personal activities.
- A space that’s used only occasionally for business.
2. How Much Can You Deduct?
The IRS provides two methods for calculating your home office deduction:
Simplified Method
- You can deduct $5 per square foot of your home office, up to 300 square feet.
- Maximum deduction = $1,500.
- No need to track utilities, rent, or mortgage details—quick and easy.
Actual Expense Method
- You calculate the percentage of your home’s square footage used for business.
- Deduct a portion of mortgage interest, rent, utilities, insurance, and maintenance costs.
- More complex but often results in a larger deduction.
Example: If your home is 2,000 square feet and your office is 200 square feet (10%), you can deduct 10% of eligible expenses (like rent, utilities, and maintenance).
Pro Tip: If you’re unsure which method to use, an accountant can help determine which option provides the biggest tax savings.
3. What Expenses Can Be Included?
If you use the actual expense method, you can deduct a percentage of:
- Mortgage interest or rent
- Utilities (electricity, water, internet, heating, etc.)
- Home insurance premiums
- Property taxes
- Repairs and maintenance related to your home office space
Note: If the repair benefits only your office (such as painting the walls), you may be able to deduct the entire cost.
4. Common Mistakes to Avoid
🚫 Using a shared space for personal and business use. The IRS requires exclusive business use—no exceptions.
🚫 Overstating your home office size. Be precise with your measurements to avoid IRS red flags.
🚫 Claiming the deduction as a W-2 employee. If you work remotely but are an employee, not self-employed, you are not eligible for this deduction.
🚫 Forgetting to keep records. Keep receipts and documents related to rent, utilities, and home office expenses in case of an audit.
Final Thoughts: Maximize Your Tax Savings with Basso & Guida
If you run a business from home, don’t overlook the home office deduction—it could mean significant tax savings each year.
To ensure you’re maximizing your deductions while staying IRS-compliant, let Basso & Guida guide you through the process. Our expert team will help you:
- Determine if you qualify for the deduction.
- Choose the best method to maximize your savings.
- Keep your records audit-proof and IRS-compliant.
📞 Schedule a Consultation today and make sure you’re getting the full benefit of your home office deduction!
