Last updated on May 15th, 2021 at 02:20 pm
If you run a business from your home, you might be able to enjoy some tax benefits. Here’s a guide to tax deductions for home office.
So, you’re self-employed and running your business right from your home office. And when tax season comes back around, you want to make sure you know how to apply for a home office deduction so you can save some money.
Well, tax deductions for a home office aren’t as complicated as you may think. In fact, if you have a few basic numbers on hand, you can calculate your deduction today!
In this article, we’ll tell you all about how home office tax deductions work, as well as what you need to know to make the process simple and easy. Now then, let’s get started!
Can I Claim My Home Office?
Determining whether or not you qualify for a home office deduction is rather simple. First, you need to be a homeowner or renter and live in a single-family home, an apartment, a condo, or a houseboat.
Next, you must have a space in your home that is both exclusively and regularly used for work. This means that it must contain office furniture like a desk, office chair and filing cabinets for example. In other words, if your space is your office, and also a spare bedroom for guests during the holidays, it won’t qualify.
Last but not least, it needs to be your principal place of business. You can have meetings elsewhere, and even a PO box, but your main place of work should be your home office.
As long as you check all of those boxes, you can claim a home office deduction on your taxes!
How Do I Determine My Deduction?
There are two methods you can use to determine the amount of your deduction. It’s up to you to decide which is easier or better for you and your situation.
The simplified method and the method we recommend doesn’t require too much thought or planning. All you need to know is the square footage of your space, and you can calculate your deduction in just a few seconds.
Once you know the square footage of your space, simply multiply that number by $5.00 to get your deduction. This works for any space up to 300 sq ft, which is a pretty large home office and should meet most people’s needs.
The second method, the regular method, requires a bit more planning and isn’t as simple to execute as the previous method. With the regular method, you’ll be adding up a variety of expenses over the year and then deducting the sum of those expenses on your taxes.
Those expenses include your mortgage interest, taxes, maintenance and repair costs, insurance, and other utilities. Of course, it’s a good idea to keep track of these details throughout the year to make tax season much easier.
And be warned, unless you have a large space, the time and energy it takes to calculate this information usually isn’t worth it. This is especially true when you consider that the figure you’re going to come up with is going to be close to the same figure you would have gotten with the simplified method.
Tax Deductions for a Home Office
Well, there you have it! Those are a few tips and tricks you can use when claiming tax deductions for a home office!
Remember, unless you’re just excellent at keeping records, the simplified method is the way to go. It’s easier, doesn’t require any work on your part, and the figure is usually around the same as the figure you’d get doing the regular method.
Regardless of which method you choose, if you qualify, be sure to claim your home office this tax season. Because every little bit of savings helps!
Looking for more business tips and tricks? Check out our blog!