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Self-Employed Tax Deductions 101: How to Claim the Home Office Deduction

Are you self-employed? If so you and you use a portion of your home regularly and exclusively for business purposes, you may be eligible to claim a home office deduction on your tax return. Section 280 of the Internal Revenue Code allows you to deduct certain expenses related to the use of your home for business, such as a portion of your mortgage or rent, utilities, insurance, and repairs.

To qualify for the home office deduction, the IRS stipulates that you must use a specific area of your home regularly and exclusively for business purposes. This area could be a room or a portion of a room, such as a desk or a worktable. The space must be used solely for business purposes and not for personal use, such as a spare bedroom that doubles as a guest room.

There are two methods for calculating the home office deduction: the simplified method and the regular method. The simplified method allows you to deduct $5 per square foot of your home used for business, up to a maximum of 300 square feet. The regular method requires you to calculate the actual expenses associated with your home office and determine the percentage of those expenses that are attributable to your business use.

It’s important to note that the home office deduction is subject to certain limitations and restrictions. For example, the deduction is limited to the amount of income generated by the business, and any unused portion of the deduction cannot be carried forward to future years. Additionally, if you sell your home, you may be required to recapture some of the depreciation claimed on your home office.

It’s always a good idea to consult with a tax professional to determine your eligibility for the home office deduction and to ensure that you are claiming the deduction correctly on your tax return. Need assistance with your 2022 taxes? Contact us.