There are two methods to claim the Home Office Deduction. You will only claim the amount of space actually used for the home office based on the square footage of your ownership in the home.
Your home office business deductions are based on either the percentage of your home used for the business or a simplified square footage calculation.
The most exact way to calculate the business percentage of your house is to measure the square footage devoted to your home office as a percentage of the total area of your home. If the office measures 150 square feet, for example, and the total area of the house is 1,200 square feet, your business percentage would be 12.5%.
The simplified square footage method may be the best way to claim this expense.
Beginning with 2013 tax returns, the IRS began offering a simplified option for claiming the deduction. This new method uses a prescribed rate multiplied by the allowable square footage used in the home.
- For 2020, the prescribed rate is $5 per square foot with a maximum of 300 square feet.
- If the office measures 150 square feet, for example, then the deduction would be $750 (150 x $5).
- The space must still be dedicated to business activities.
With either method, the qualification for the home office deduction is determined each year. Your eligibility may change from one year to the next. Finally, please note that only certain expenses such as rent, mortgage interest and property taxes qualify for the deduction, and the deduction is limited to $10,000.
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The Home Office Deduction - TurboTax Tax Tips & Videos
