If you use part of your home for business, you may be able to claim a home office on your taxes this year. The home office deduction is available for homeowners and renters, and applies to all types of homes. Learn more if your workspace qualifies as a home office, here.
There are a few ways to claim a home office on your taxes. In 2013, the IRS rolled out the Simplified Method for home offices which can significantly reduce record keeping burden by allowing a small business owner or employee to calculate square footage of a home office and multiply that by a prescribed rate ($5 per square foot for a maximum of 300 square feet), instead of calculating actual expenses.
The Regular Method requires a small business owner to calculate the actual expenses of their home office. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Generally, when using the regular method, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.
Either method is fine for claiming a home office, and some small business owners find one way to be more beneficial than the other. Keep in mind that the method you use to claim your home office is not as important as the use of the space being used exclusively and regularly for business use.
For a full list of deductions and qualifications for a home office from the IRS, click here. Be sure to consult a professional accountant and virtual bookkeeper before claiming a home office on your taxes to make the most of your deductions. Vyde can help with any questions you may have about your home office.