home officeWhen it comes to deducting expenses for small business owners who work from home, the Internal Revenue Service (IRS) has two methods for Home Office Deduction: regular and simplified.

According to the regular method, you would have to calculate the usage of your home for business as well as personal obligations. The IRS states that “Direct business expenses are fully deductible and the percentage of the home floor space used for business is assignable to indirect total expenses.”

Self-employed taxpayers must file Form 1040, Schedule C, Profit or Loss From Business (Sole Proprietorship), and compute this deduction on Form 8829, Expenses for Business Use of Your Home.

If you’re looking to reduce the paperwork and burden of keeping records, the simplified method is your ideal option. The IRS allows a prescribed rate of $5 a square foot for business use of the home with a maximum allowable deduction available based on up to 300 square feet.

This would require taxpayers to complete a worksheet in which the results would then be included on the tax return.

The necessary forms within the simplified method are below:

Research shows that in the past, approximately 26 million Americans have home offices, but only 3.4 million taxpayers claim home-office deductions. While the area you are claiming must be used exclusively and regularly for conducting business, it can be worth the extra effort in figuring out exact costs.

Don’t miss this deduction opportunity in fear of facing a tax audit. After all, Tax Defense Partners are here to help! Call us today to determine whether or not you qualify for the Home Office Deduction.