How is the Home Office Deduction Calculated?

Self-Employed Brookline, NH Resident Has Questions

When claiming the home office deduction on your taxes you can use the simple or regular method for calculating your deduction.  To determine which is the best calculation, you will want to determine which of the two will offer you the larger deduction.  With the simplified method, you would complete a Simplified Method Worksheet, supplied by the IRS.  This will require you to indicate the square footage of your business space in the home among other factors to determine the deduction amount.  The regular deduction method uses Form 8829 and factors in mortgage interest, real estate taxes, insurance, and utilities to determine the deduction amount.

A newly self-employed individual in Brookline was looking to take advantage of the home office deduction.  Unsure of how this would work when filing his taxes, he contacted Merrimack Tax Associates for assistance.

Requirements to Be Eligible for the Home Office Deduction

Most importantly you must be a self-employed individual, filing as such on your taxes, to claim this deduction.  You cannot be working for an employer to claim the home office tax deduction.  To qualify for the home office deduction, you must be conducting business regularly from this area of your home.  Your home must be your principal place of business.  It does not have to be a room used exclusively for the business, but it must be a designated area that is used solely for business purposes.  This can be a large room that has one half for family and the other half for business purposes.

Determining the Home Office Deduction Calculation that is Right for You

The simplified calculation is more straightforward way to determine what your home office deduction amount should be.  However, depending on the size of the property and your expenses, you may be able to deduct more using the regular deduction, saving you money on your taxes.  A tax professional can help you to determine which method is right for your circumstances.

The Brookline resident was able to meet with an associate at Merrimack Tax Associates and now has a good understanding of which home office deduction calculation will be the best fit when it comes time to file his taxes.