As this site has grown, I’ve gotten interested in the possibility of taking a home office deduction on my federal taxes. The problem is that I know virtually nothing about doing so. According to the IRS, if you use a portion of your home for business purposes, you may be able to take a home office tax deduction. But here’s the catch… You can claim this deduction only if you use your home office regularly and exclusively as your principal place of business, or as a place to meet or deal with your patients, client, or customers in the normal course of your trade or business. What follows is a (very) quick summary of a few things that I learned while conducting a bit of preliminary research…
What types of things can you deduct?
Expenses that you may be able to deduct for business use of the home may include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, depreciation, painting and repairs.
How much can you deduct?
Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction will be limited if your gross income from your business is less than your total business expenses.
How do you do it?
If you are self-employed, use Form 8829 to figure your home office deduction and report those deductions on line 30 of Schedule C, Form 1040.
If you’re an employee, you have additional requirements to meet… The regular and exclusive business use must be “for the convenience of your employer” (e.g., your employer doesn’t provide office space, so you have to use your home office). Another thing to think about is what effect this deduction might have on your standing with respect to the Alternative Minimum Tax (AMT) — depending on your income level, too many deductions can trigger the AMT.
See also: More on the Home Office Tax Deduction