Home In Office Credit
Purpose
The Home in Office deduction allows business owners to deduct a portion of the expenses for their home such as rent, mortgage interest, property taxes, utilities, insurance and repairs and maintenance as a business expense, lowering their potential taxes.
Objective
Are you a business owner that uses part of your home as an office and/or place to store inventory for your business? If so, you may be eligible for the home in office credit. Here are key points of the credit-
Eligibility
- The section of your home used as an office or inventory storage must be used regularly and exclusively for business purposes. This means it can’t be a space that is only used occasionally for business purposes or an area that is also used for personal purposes, such a kitchen table or living room couch.
- The Home Office must be used as your principal place of business. That means, if you have another physical office outside of your home, most likely, you would not qualify for the deduction.
- The deduction is only available to business owners, it is not available to non-owner w2 employees.
- The credit can only be taken when a business has a profit (more sales than expenses). If there are Home Office expenses and the business does not have a profit, the expenses are not deducted that year, they are carried forward into future years until they can be used.
How Does it Work?
- The amount of deduction is the percentage of the space used as an office divided by the total square footage of your home.
- For example: If your designated space is 200 sqft. and your home is 1,000 sqft. then 200/1,000 = 20% of your home expenses can be used for Home in Office Credit.
- The IRS does offer a simplified method, which allows business owners to deduct expenses without tracking expenses. This method does allow a deduction up to $1,500 ($5 per square foot)