What qualifies for the home office deduction?

Created by Shubha Bisht, Modified on Wed, 24 Jan 2024 at 02:11 PM by Shubha Bisht

Highlights

The home office deduction allows you to take a deduction if you use a portion of your home to conduct business.
There are two methods to claim this deduction: the simplified method (which is a set amount of $5 per square foot up to 300 square feet) and the regular method (which is a calculation based on the size of your home versus the amount of space dedicated to your business).

What is the home office deduction?

Generally, as a business owner you do not get a tax incentive to use your house as a business. However, the IRS has provided that if part of your home is used "regularly" and "exclusively" for your trade or business then you may be eligible to deduct those expenses.

What is considered “regularly” and “exclusively”?

Regularly means that you’re using the area consistently for business purposes.
Exclusively means that you’re using the area for business purposes only.

What are the two methods for filing for this deduction?

There are two separate options for the home office deduction: the regular method and the simplified method. The difference is that instead of using a percentage for the regular method, for the simplified option there is a standard deduction of $5 per square foot of the home use for your business (max. of 300 square feet).

The simplified option is the method supported by Beem's Filer, but you can check out further information about the regular method here. For coverage details and other important legal information about Filer, you can read more here.

How much can I deduct if I use the regular method?

You will need to figure out the percentage of your home regularly and exclusively devoted to your business activities. Per the IRS, you may divide the home office square footage with the total square footage of your home to find this percentage. Using this percentage you can then determine how much of the home expenses are deductible.

Example: 100 square footage of home office, 2,000 total square footage of the home. 100/2000 = .05 or 5%

Why is my home office deduction not showing up?

There are a number of reasons why your home office deduction may not show up or be deductible but the common reasons are below.

You can only deduct home office expenses up to the net income of your business. If your net income is less than the calculated home office deduction, it will be limited.
If you are operating at a loss, the full home office deduction will be limited and carried forward for use in future years.

This content is provided for informational purposes only and should not be construed as tax, legal, financial, accounting, or other advice. Rules and regulations vary by location and are subject to change, so please consult with an expert if you need advice specific to you.

Any third-party links are provided for informational purposes only. The third parties and their sites are not endorsed by Beem and Beem is not responsible for, and has no control over, their content, privacy policies, or terms of service.