Small Business, Big Savings: Take Full Advantage of the Home Office Deduction
Unlock smarter savings—and keep more hard‑earned dollars working for you!
Keywords: home office deduction, small business owner, tax write‑offs, Form 8829, simplified method, IRS, maximize deductions
As a small business owner, you already know every dollar counts. The IRS’ home office deduction gives you a legal way to lower your taxable income by claiming expenses related to running your business from home. Whether you’re a freelancer, solo entrepreneur, or growing small business, this can put real money back in your pocket.
Under U.S. tax rules, only self-employed individuals—not W‑2 employees—qualify.
Eligible expenses can include a portion of:
• Mortgage interest or rent
• Utilities
• Insurance
• Repairs and maintenance
• Internet and security systems
• Depreciation on furniture and equipment
This makes the deduction one of the most valuable—and often overlooked—tax tools for small business owners.
The Two Ways To Calculate Your Deduction
There are two IRS-approved methods to calculate a home office deduction:
Simplified Method
• Deduct $5 per square foot, up to 300 sq ft = max $1,500 deduction.
• Easy to compute—no Form 8829 needed.
• Best for smaller workspaces and minimal additional expenses.
Actual Expense (Regular) Method
• Track your percentage of home used for business (e.g., 150 sq ft office ÷ 1,500 sq ft home = 10%).
• Deduct that percentage of qualifying costs: mortgage interest, rent, utilities, homeowners insurance, repairs, and more.
• Provide full documentation on Form 8829
• Best when you have significant home-related business expenses.
Meets The “Regular and Exclusive Use” Test
Another parameter that needs to be considered to qualify for this deduction, a home office must be used:
• Regularly — not just occasionally
• Exclusively — not shared for personal use
This means a dedicated room or clearly defined workspace. A guest bedroom that doubles as a workspace generally won’t qualify.
Track Your Expenses Diligently
For the actual method, accurate record‑keeping is essential:
1. Measure square footage: Keep a sketch or blueprint.
2. Gather supporting documents: Mortgage or lease statements, utility bills, insurance premiums, security and maintenance invoices.
3. Distinguish expenses:
◦ Direct: Office-specific (e.g., painting, wiring)—fully deductible.
◦ Indirect: Shared across home (e.g., electricity, homeowners insurance)—deducted based on your usage percentage.
4. Claim depreciation: Furniture and equipment used solely in your office may be depreciated over several years or deducted fully using Section 179 or bonus depreciation.
Beyond The Basics: Extra Eligible Deductions
Here’s where it gets interesting for savvy small business owners. You can also deduct the following expenses:
• Internet & phone – Fully deductible if exclusively for business; otherwise prorate.
• Home security – Portion tied to your office space counts.
• Repairs & maintenance – Office-related fixes (e.g., painting, HVAC servicing in office area) are deductible based on square footage.
• Casualty losses – In case of fire, flood, etc., you may claim a deductible loss for your home office portion.
• Real estate taxes & insurance – Deduct the prorated share for your business space.
Know The Implications
Sale Of Your Home
If you ever sell your house, the “business part” may affect your gain exclusion. Depreciation recapture becomes relevant unless you qualify for an exclusion.
Tip: Keep detailed depreciation records and consult a tax professional before selling.
Practice Safe Claims
Sole proprietors cannot deduct more than their business net profit. Any unused home office deduction carry over to future years.
• Simplified is quick and easy, ideal for smaller offices and minimal expenses.
• Actual method offers more deduction potential but demands documentation and effort.
Pro tips for Maximizing Your Deduction
• Take photos and floor plans to demonstrate exclusive business use.
• Keep a dedicated log of utility and maintenance bills.
• Use a second phone line or internet plan solely for business for full deductions.
• Review annually—redraw measurements if your space changes.
• Consult a CPA or enrolled agent, especially for depreciation, home sales, or if you face an audit.
Stay Compliant and Audit‑Ready
The IRS may ask for proof of exclusive and regular use—even years later.
• Keep photos, sketches, assessments.
• Maintain separate files for personal and business expenses.
• File Form 8829 when using actual expenses.
Final Thoughts
The home office deduction is one of the top tax breaks available to self‑employed small business owners—but only if you use it smartly. Whether you choose the simple method or allocate every utility penny, the result is the same: more dollars left in your business.
By staying organized, using the right calculation approach, and maintaining good records, you can confidently claim your deduction—without fear of an audit.
Bottom line: Dedicated space + detailed records + the right calculation = real tax savings.
Next steps:
1. Choose your preferred method.
2. Gather documentation.
3. Talk to your CPA or enrolled agent.
4. File accurately—preferably with Form 8829.
Have questions? Need a second set of eyes on your deduction strategy? Drop me a line here at Kurtz Accounting. We’re always happy to help small‑business owners pay less tax and keep growing!
Disclaimer: The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Jeffrey Kurtz CPA LLC to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact Jeffrey Kurtz CPA LLC prior to taking any action based upon this information. Jeffrey Kurtz CPA LLC assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.