1. What is the Home Office Deduction?

The home office deduction allows qualified taxpayers to deduct certain home expenses when they use part of their home regularly and exclusively for business purposes. The simplified method offers an easy way to calculate this deduction.

2. How Does the Calculator Work?

The calculator uses the simplified method formula:

Where:

• \( Area \) — The portion of your home used for business (square feet)
• \( Rate\ per\ sqft \) — IRS prescribed rate (currently $5/sqft up to 300 sqft)

Explanation: This method simplifies recordkeeping by allowing a standard deduction based on the area used rather than actual expenses.

3. Importance of Home Office Deduction

Details: Properly claiming home office deductions can significantly reduce taxable income for self-employed individuals and small business owners who work from home.

4. Using the Calculator

Tips: Measure the area of your home used exclusively and regularly for business. The standard rate is $5 per sqft (max 300 sqft), but you can adjust if using a different rate.

5. Frequently Asked Questions (FAQ)

Q1: Who qualifies for home office deduction?
A: Self-employed individuals and small business owners who use part of their home regularly and exclusively for business.

Q2: What's the maximum deduction with simplified method?
A: $1,500 (300 sqft × $5/sqft) under current IRS rules.

Q3: Can employees claim home office deduction?
A: Under current tax law, W-2 employees cannot claim home office deductions (as of 2018 tax reform).

Q4: What's the regular method vs simplified method?
A: The regular method calculates actual expenses (mortgage interest, insurance, utilities, repairs, depreciation) allocated to business use.

Q5: What records should I keep?
A: For simplified method, keep documentation showing the business use area. For regular method, keep all expense receipts and records.