Home Office Deduction

Your home office must be a space used regularly and exclusively for your business. It can't double as a personal room. A corner of the dining room that's also used for meals doesn't qualify.

The space needs to be your principal place of business, a place where you regularly meet clients or customers, or a separate structure like a detached studio or shop. Regular and exclusive use is the key test.

You have two ways to figure the deduction. The simplified method applies a flat dollar amount per square foot of office space, up to a maximum square footage. See the current amount and cap on IRS.gov.

The regular method adds up your actual home expenses (rent or mortgage interest, utilities, insurance, repairs, and depreciation) and multiplies by the percentage of your home used for business. It usually gives a bigger deduction but requires more recordkeeping.

You can switch between methods in later years, with some limits. See Publication 587 for the details on switching and what carries over.

Whichever method you use, keep proof of the space and the expenses. Measure the office and the total home square footage, and keep photos showing the space is used only for business.

Save rent or mortgage statements, utility bills, insurance premiums, and repair receipts. If you use the regular method, keep Form 8829 and your depreciation worksheet.