When calculating the business use of home by simplified method, you will multiply the total home office space (up to 300 square feet) by the rate per square foot ($5) for the current tax year.
Does My Home Office Qualify?
W-2 employees do not qualify for this deduction. It is only available to self-employed individuals.
Like most credits, there are requirements that a home office must meet in order to be eligible to claim the home office deduction.
- The space must be their principal place of business
- They must use the space regularly
- The space must only be used for business purposes
The maximum value of the home office deduction using the simplified method is $1,500 per year. This is based on a rate of $5 per square foot for up to 300 square feet. However, you must also have earned enough gross income to qualify for the deduction. If your business deductions (not including home office) are equal to or more than the gross income from the business, then you may not claim the home office deduction.
When you opt to use the simplified method, you cannot deduct depreciation or section 179 expenses for the space being used as the office.
However, business expenses that are not part of the home office – such as marketing and advertising or supplies and equipment – are still deductible.
What Information Do I Need to Calculate the Deduction?
When you calculate the home office deduction using the simplified method, you will need the following information:
- The area (in sq. feet) of the home office space that was used exclusively for business*
- Gross income earned from the business use of their home
- Additional business expenses unrelated to the home office
*If the business is part-time or seasonal, or if the size of the space changed (expanded or got smaller) at some point during the year, you’ll also need to know:
- the size of the new area
- the number of days they conducted business from their home office each month
What if I have more than one qualifying business?
If you operate more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified businesses. Do not allocate more square feet to a qualified business use than you actually use for that business.
Program Entry
- Federal Section
- Income
- Schedule C
- Expenses for Business Use of Your Home
- Simplified Method for Business Use of Your Home
For more information on the Simplified Method for Business Use of Your Home, please click here.