Are you self-employed and using your home for business? If so, you may qualify for the home office deduction. Here at Mazuma, we want to help all of our clients stay compliant, stay organized and save on taxes. Here are some guidelines and tips to help you take advantage of your home office to maximize your tax savings:
Can you claim a home office deduction?
There are requirements you need to meet to qualify for a home office deduction: Do you use an area of your home regularly and exclusively for business? Are you self-employed?
If you answered yes to both questions, you likely qualify. It’s important to note your workspace does not need to be a separate room or even an office to qualify. For example, if you use half of your basement to create and ship custom word-working projects and that space is dedicated to your business, you could claim a home office deduction for that workspace.
How do you calculate your home office deduction?
There are two ways to calculate a home office deduction: the simplified and standard methods. For either option, you will need to know the square footage of the dedicated workspace in your home.
To calculate the home office deduction for the simplified method, multiply the square footage of your office space by $5. That’s it!
Is your home office 300 square feet? Great! The IRS gives a $5.00 deduction per square foot for any space that is used exclusively for business (maximum of $1,500 for a 300-square-foot space). For example, if you are using an office that is 150 square feet, with the $5.00 deduction, that amount would be $750.00. It’s that simple!
With this method, you deduct the actual expense of your office. For expenses that only impact your office (such as paint, office decorations, repairs to your office, etc.) you can deduct 100%. For other expenses (such as depreciation, rent or mortgage, property taxes, home insurance, utilities, maintenance, and general repairs), you can deduct a percentage of those expenses. To calculate this percentage, divide the square footage of your office by the square footage of your home. This tells you what percentage of your home your office takes up. For example, if you have a home that is 2,000 square feet and a home office that is 200 square feet, you could deduct 10% of your utilities, rent, repairs, etc.
Still have questions?
At Mazuma, we help businesses save time, money, and stress by taking care of their bookkeeping and taxes. If you have additional questions about the home office or other deductions, our team would love to help! That’s our specialty. Reach out to our team or try our services for free to schedule a consultation with one of our accountants.