Home Office Deduction
Authority: IRC §280A(c)
The home office deduction allows self-employed taxpayers to deduct the costs of the portion of their home used regularly and exclusively for business, when that space is the principal place of business or is used to meet clients. "Exclusive use" is strict: a dedicated room or clearly defined area used only for the business. Qualifying administrative use counts, so a contractor who does all invoicing and scheduling from a home desk qualifies even though the actual work happens elsewhere. Two methods exist: the simplified method ($5 per square foot, capped at 300 square feet, so up to $1,500) and the actual-expense method (the business-use percentage of rent or depreciation, utilities, insurance, and repairs). W-2 employees cannot claim it, but S corporation owner-employees can capture the same economics through an accountable plan reimbursement.
Example
A therapist uses a 240 square foot room, 10% of her apartment, solely for sessions and admin. With $30,000 of annual rent and utilities, the actual method yields a $3,000 deduction versus $1,200 under the simplified method, so she uses actual expenses.
Related terms
Accountable Plan
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Sole Proprietorship
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Augusta Rule (Section 280A(g))
The Augusta rule lets a homeowner rent out their personal residence for 14 or fewer days per year and exclude the...
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