The Home Office Deduction Simplified Vs Actual Expense Method

Otherwise, you won’t meet the exclusive-use test for any activity. There’s no other fixed location where you conduct substantial administrative or management activities of your trade or business. If your business space is large, or if you have many expenses related to your home business space for the year, you might get a larger deduction with the normal method. If you have a very small home business space, under 300 square feet, the simplified deduction might be best.

• Tax reform in 2018 changed the home office deduction, including what traditional employees could deduct related to their work expenses.
• The instructions for Schedule C include a simplified deduction worksheet that might help you in this calculation.
• Three Oaks Capital Management, LLC DBA Three Oaks Wealth is a Registered Investment Adviser in the States of Oregon and California.
• You can also use tools like a home office deduction calculator.

Then, you multiply that Actual Home Office Expenses Vs The Simplified Method by the total amount of actual expenses. The home office regular method requires that you calculate the percentage of your home used for business by dividing the area used for business by the total area of your home. You can’t claim home office deductions greater than your gross income, but you can carry the excess deduction amount over to future years.

No place like home: Understanding your home office deduction

You can determine the value of your deduction the easy way or the hard way. Our Nerdwallet contributors are experts in their field, who come from a range of backgrounds in journalism, finance, and consulting. We adhere to the highest editorial standards to ensure our readers have the information necessary to make financial decisions with confidence. If you use part of your home for your business, you may be able to score the home office deduction. The tools and resources you need to take your business to the next level.

You can claim 100 percent of direct expenses on your tax return. You may also deduct direct home office expenses, in addition to the indirect expenses listed above. Remodeling or painting your home office, for example, would be an eligible direct expense.

SIMPLIFIED METHOD

With the standard simplified method, you can only claim a home office deduction on pre-set square footage limits. The rules for qualifying for the new home office deduction remain the same as with the actual expense method. In order to qualify for this deduction, the home office area must be used regularly and exclusively for business purposes [IRC §280A ].