One of the best tax deductions available to almost all business owners under the US Tax Code is the Home Office Deduction. In this modern economy, who doesn’t work from home? The best part is, you don’t even have to own your home. Business owners who rent are also eligible to benefit from their home offices and work spaces.
Only two requirements need to be met to quality for the home office tax benefits, they are:
There are only two methods to calculate your deduction, the Simplified Method and the Actual Expenses Method. The first step for both methods requires you to calculate the business use percentage of your home office by dividing the square footage of the office space vs the total square footage of your home.
For the Simplified Method, all you have to do is multiply the office or work space square footage by $5 for the 2019 Tax Year, up to a maximum of $1,500 can be deducted. So if your office is 300 Sq Ft, then your total deduction is $1,500 and you would be maxed out.
The $1,500 max out of the simplified method is why I myself use the Actual Expenses Method. For this method you get to multiply your business use percentage that you calculated by all ACTUAL expenses incurred during the year. The trick is, you must track and account for those expenses and their related bills and payment receipts. The Actual Method number is almost certainly always larger than $1,500. Sadly, many leave tax deductions on the table due to lack of documentation and understanding of what is actually deductible! Below are some expenses available to business owners with home offices:
Expenses Available to Deduct:
Are you currently using all of your home office deductions? Contact us to review your business deductions.