How Self Employed Taxpayers Can Deduct Their Home Office

How Do I Deduct My Home Office

How Self-Employed Taxpayers Can Save Money on Taxes

If you make any money as a freelancer or self-employed individual, you may save money on

your taxes with the home office deduction. The deduction is only for those who don’t work for

someone (if your boss has you working from home it doesn’t count).

If you are self-employed, here’s how a home office can save you money on your taxes.

What is the Home Office Deduction?

If you use a part of your home exclusively to run your business, you may deduct its costs on

your tax return. You’ll deduct a portion of your expenses to maintain the office, such as a

prorated amount of your mortgage interest, real estate taxes, utility bills, and other expenses

to maintain the home.

An office only qualifies if it’s exclusively used for your business. For example, if you run your

business out of your family room where your family also watches TV, it doesn’t count. But if you

have a small area in the corner of your house with a desk and phone you use as an office and

nothing else, you can take the deduction.

Who Qualifies?

To qualify, you must be a freelancer, self-employed individual, or a gig worker. You can have

another job, but you must have something outside of that job that requires you to run a home

office to take the deduction.

You must also prove your home is your principal place of business. You could make almost any

business use your home as its principal place of business if it has administrative work. For

example, if you drive for Uber, you don’t have an office to handle your paperwork and tax

documentation. Set up an area in your home where you run your business and you can take the

home office deduction.

How Does it Work?

You can choose from two options to take the home office deduction:

 Simplified deduction – All users deduct $5 per square foot of the home office. For

example, if your home office is 100 square feet, you could deduct $500. There is a

maximum deduction of $1,500 or 300 square feet for the simplified deduction.

 Regular deduction – Take your office square footage and divide it by your home’s total

square footage. This is your percentage. Use that percentage to determine the amount

of each eligible bill you can write off, such as mortgage interest, utilities, and home

maintenance costs.

You’ll complete the appropriate schedule based on the method you chose. For the Simplified

deduction, you’d complete the Simplified Method Worksheet. For the regular method, you’d

complete Form 8829.

Final Thoughts

Keep careful receipts for all expenses incurred in your home and have proof ready that you use

the area of your home exclusively for business. Make sure your business counts as a business

and not a hobby too. This means you materially participate in the business and it makes a profit

in at least 3 of the last 5 years.