Do you use a portion of your home exclusively for business purposes? Is this space your principal work location? If so, you may be able to take a tax deduction for costs related to maintaining a home office space.
Many people who qualify don’t take this deduction because it can be complicated to calculate. However, the IRS introduced a simplified calculation method a few years ago, making the world of home office deductions much easier to navigate.
In the traditional method of calculating a deduction for home office expenses, you itemize all of your costs. Typical expenses include:
- Rent or mortgage interest
Since your entire home isn’t your office, you can’t deduct the full amount of these costs. Instead, you have to determine what amount of each expense is incurred just for your office area. This can get very complicated very quickly, and has deterred many individuals from deducting home office expenses in the past.
The IRS came to the rescue in 2013 by introducing a simplified method for deducting home office expenses. Just as you can take the standard deduction or itemize deductions on your federal tax return, you can now choose to take a standard deduction or itemize expenses for a home office.
In this simplified method, your home office deduction is based on the size of your particular office. The standard deduction is $5 per square foot. This covers everything, from rent, to utilities, to repairs. Instead of itemizing each expense, you can simply take the flat $5-per-square-foot deduction and be done!
Which Method Should You Choose?
There are pros and cons to each method. Deciding whether you want to itemize your expenses or take the standard deduction for home office use will depend on a number of factors.
First, you should consider which method is more financially beneficial for you. If it costs significantly more than $5 per square foot to maintain your home office space, you may want to itemize instead.
You should also think about how much energy you want to spend keeping up with your home office expenses. If you don’t want to devote time and resources to tracking that data, taking the standard deduction might be a great choice.
The team at Taxation Solutions, Inc. is here for you if you have further questions about deducting expenses for use of a home office. We provide comprehensive tax information and expertise to clients in Raleigh, South Carolina, and the surrounding region. Contact us today for more information!