Small Business Owners: Do You Qualify For Home Office Deductions?

Are you a small business owner? Do you work from home? If so, you may be able to qualify for some home office deductions! Let’s discuss so you can be prepared when you file your 2021 tax returns.

Something to note, before we get into it further: employees are not eligible to claim the home office deduction. It is for business owners only.

Here are some ground rules for business owners interested in claiming a home office deduction:

  • Home office deductions are available for both those who own a house and those who rent.
  • You cannot deduct every expense that comes with owning a house. However, expenses that can be deducted include mortgage interest, insurance, utilities, repairs, maintenance, depreciation, and rent.
  • In order to claim a home office, you must meet certain requirements.

How do you know if you qualify to deduct your home office expenses?  Typically, there are two basic requirements.

  1. You must have an exclusive area of your home that you use for conducting business on a regular basis.
  2. Your home must be the main place where you conduct your business. This means, if you have another location where you could perform the duties you perform at home, then you would most likely not qualify. In this case, the only way you would qualify for a home office deduction is if you have met any of your customers at your home location.

If you qualify to deduct your home office expenses, there are two ways to calculate this deduction:

  1. Simplified method: Use a $5 per square foot rate, and multiply that by the square footage of the area in your home that you use for business. Keep in mind, the maximum size is 300 square feet and the maximum deduction is $1,500.
  2. Regular method: This method is much more detailed and the calculations involved should be discussed with your tax professional.

Give us a call if you would like to discuss more about your home office. We would be happy to help you determine how best to calculate your expenses.


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