Can You Claim a Home Office Deduction if You Rent?

Renters can claim the home office deduction.

According to TurboTax, in the 1990s the United States Congress made it easier for home business operators to claim the home office deduction. The home office deduction can provide valuable income tax savings for a business operated out of your home. Fortunately, the deduction is available whether you rent or own the home where you live and work.

No Distinction

When it comes to the home office deduction, the tax laws and IRS rules do not distinguish between homes owned or rented by a business operator. A home business operator can claim the home office deduction whether the business owner rents or owns the home where the office is located.

Pro Rata Rent

Renting a home can actually make it easier to calculate the home office deduction. When you own a home, you have to first compute the portion of your home that you use, and then you have to depreciate that portion for tax purposes. When you rent a home, though, you don't have a capital asset so you don't have to factor in depreciation. You merely have to calculate the percentage of your home dedicated to the home office and then multiply that percentage by your rent. The product is the value of the deduction you can claim.

Same Rules

A home office deduction in a rental home is subject to all the same rules as a home office deduction in an owned home. The home office must be dedicated to your business and used exclusively by your business. Additionally, you must regularly use the office for business purposes. Finally, the office must be either your primary place of business or a place where you regularly meet with clients or customers.

Example

You rent a 2,000-square-foot home for $2,000 per month. You dedicate a 500-square-foot bedroom as your business office and you meet the requirements above. The 500-square-feet office is 25 percent of your home, which means you may deduct 25 percent of your rent. Over a one-year period, this equals $6,000 ($2,000 x .25 x 12).

References

• IRS: What You Need to Know About the Home Office Deduction
• TurboTax: The Home Office Deduction