You may qualify for the home office deduction if you work at home if you meet Internal Revenue Service criteria. Home offices must be spaces that are used regularly, and exclusively, for business purposes. A home office has to be your primary workplace, or where you do administrative and management tasks if you work outside your home. When you are an employee, working at home must be for the convenience of your employer, rather than for your benefit. The IRS provides two ways to deduct home office expenses.
Regular Deduction Method
Figure the home office deduction as a percentage of your home expenses equal to the proportion of the home devoted to business activities. For instance, if the home office area is 350 square feet and your home measures 1,750 square feet, you can deduct 20 percent of home operating costs. Allowable costs include mortgage interest or rent, utilities, repairs, insurance and real estate taxes. Enter these home office expenses on IRS Form 8829. Use the information on the 8829 to complete Schedule C.
Simplified Deduction Method
Beginning in 2013, there’s a simplified way to claim the home office deduction. The office must meet the same criteria that apply when the regular method is used. Multiply the square footage of your home office by $5, up to a maximum of 300 square feet. Report the result using Schedule C or F.