With the advancement of Internet access and Cloud storage, working from home is becoming the norm for many professionals. Yet, claiming an office in the home has been a burden for some taxpayers, so the IRS has provided a simplified home office deduction rate to make the process easier.
To claim the home office deduction, if you are a business owner, you must use a portion of your home regularly and exclusively as the principal place of business, as a place to meet with clients, or in connection with your trade or business. As an employee, to claim the deduction, your employer must require that you maintain a home office for his or her convenience and you must meet the regular and exclusive use requirement.
If you maintain a qualifying home office, you may elect to use the new simplified method to compute your deduction. The simplified method allows you to deduct $5 per square foot of home office space up to 300 square feet, for an annual maximum deduction of $1,500. If you choose this method, you cannot claim depreciation; however, you can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A.
These deductions need not be allocated between personal and business use, as is required under the regular method. Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.
For more information on deducting your home office contact us at 206-522-0110 for a consultation.