tax tips — November 02, 2017

Home Office Deductions and How to Qualify

by Susannah McQuitty

A woman working in her home office

Ah, there’s nothing quite like clocking in in your home office, coffee in hand and not a single 10-minute conversation about the weather in sight. The perks to having a place in your home specifically for work are many, and we’re about to add a couple more to the list.

When you have a designated place in your home that is only used for work, you can qualify for several tax breaks. Let’s walk through what that means, and how you can take advantage of home office deductions.

Marking the territory

It’s easy to think “special room of the house” when you hear “home office,” but you actually don’t need an entire room to claim home office deductions. All you need is a space that’s used regularly and exclusively for business, even if it’s the square footage of a desk and a chair.

Regular and exclusive business use

You’ll see these two qualifiers pretty much every time home office deductions are brought up. Regular business use means that you’re using the space for business routinely—over and over again, at the same time or in the same way. This can be on a daily, weekly or monthly basis, but incidental or occasional use won’t count.

If, for example, you’re an employee who sometimes chooses to take work home with you but don’t regularly work from a home office for your employer’s convenience, you can’t deduct your space.

The other qualifier, exclusive business use, means that your home office is only used for business. Some may use their home office space for personal reasons, such as storing personal items, surfing the internet, managing finances, or paying personal bills, but, as much as I hate to say it, that bumps your qualification for home office deductions to a flat zero. To play it safe, use the space for business-related purposes only.

An illustration of coffee that says “No small talk, just coffee

Backing up your claims

Just a quick note here: If you plan to claim a home office deduction, be very sure that you have documentation to back up your claim. The IRS has encountered a lot of fraudulent home office claims over the years, so they take your qualifying factors seriously. If you say, “Yep, I only use this space for business,” make sure you can substantiate with records like a timesheet calculator and even photos of the space.

Choosing how to claim the deduction

Below is our infographic on deducting home office expensesinfographic on claiming the home office deduction. Put simply, there are two different ways to do this: the actual expense method or the safe harbor method.

The expense method lets you list out and deduct your exact direct and indirect expenses. Direct expenses are spent solely on your home office (e.g. painting the room or buying a desk), and indirect expenses calculate how much of your home expenses are related to your home office (for example, you can deduct a percentage of your utility bill for the part of your home used for business).

The safe harbor method is a simplified base deduction per square foot of your home office. If you didn’t keep good records of your expenses or just don’t want to hassle with the details, this method is for you.

Both methods of deducting home office expenses have their own pros and cons, so give our infographic a look for more information.

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