If you work from home there are some new options for claiming home office deductions making the process simpler and saving you time. Starting this tax year the IRS has simplified the process of claiming deductions when you use your home as a business, not only does it make it easier but it will help you maintain the necessary records needed. There has been no change in the current eligibility requirement for the deductions, so you should make sure you qualify.
One of the requirements of claiming a home office deduction is that the area of your home that you conduct business in has to be exclusively used for that purpose and must be designated for business functions. In addition to the aforementioned requirement, your home office must also adhere to the following guidelines:
- It must be the primary location of the business.
- Normal business operations must be conducted there with clients and customers.
- It must be separated from your home, in areas such as garages, barns or studios.
There are specific costs that are related to your home such as rent, mortgage interest, taxes and utilities that are included in the home office deduction. Typically you can use a percentage of these expenses for your deduction dependent on how much your home is used for business purposes.
This year instead of having to itemize deductions for your home office, the process is simplified, allowing you to claim a general deduction. You can claim a maximum of up to 300 square feet at a rate of $5 per square foot up to $1,500 per year.
For situations where your home based income is less than the total amount expended, you may be limited on the deduction. If you are an owner who is self-employed and want to calculate your expenses you should use Form 8829, Expenses for Business Use of Your Home, this will allow you to get a total amount for your deduction. To claim the deduction you will have to file Schedule C, Profit or Loss from Business, for either the simplified option or expense method.
If you are a work at home employee for another business, you must meet certain other criteria. Added to the above qualifications, your employer must also benefit from you working from home.
