I use my home for my business. Am I allowed to take a deduction for that?
If you qualify, you can claim the deduction whether you rent or own your home. You may use either the simplified option or the regular method to claim your deduction. Here are six tips that you should know about the home office deduction:
Regular and exclusive Use. As a general rule, you must use a part of your home regularly and exclusively for business purposes. The part of your home used for business must also be:
Your principal place of business, or
A place where you meet clients or customers in the normal course of business, or
A separate structure not attached to your home. Examples could include a garage or a studio.
Calculating the deduction
There are 2 options:
Simplified method. If you use the simplified option, multiply the allowable square footage of your office by $5. The maximum allowed using this option is $1,500 (300 square feet). This option will make it easier for you to keep records. Important: Using this option does not change the rules for claiming a home office deduction.
Regular method. This method includes certain costs that you paid for your home. For example, if you rent your home, part of the rent you paid may qualify. If you own your home, part of the mortgage interest, taxes and utilities you paid may qualify. The amount you can deduct usually depends on the percentage of your home used for business.
Deduction limit. If your gross income from the business use of your home is less than your expenses, the deduction may be limited.
Self-employed people. If you are self-employed and choose the regular method, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. You can claim your deduction using either method on Schedule C, Profit or Loss From Business.