Point me in the direction on how to make that work?
Point me in the direction on how to make that work?
Home-based business owners often use part of their home to conduct some or all their business activities. When your business meets the requirements set by the Internal Revenue Service, you are eligible for a home office deduction on your
tax return. The amount of your deduction depends on specific allowable expenses. However, the IRS allows a rent
tax deduction for renters as well as a similar deduction for homeowners.
Test for Regular Exclusive Use
The
IRS requires that your home-based business meets two requirements to qualify for a home office deduction. The home, whether owned or rented, must be the principal location of your business, and all the calculations of your potential deduction apply only to the part of your home that you use regularly and exclusively for your business activities.
Multipurpose rooms in your rental home do not meet the exclusive-use test. If you use a spare bedroom as your home office during business hours and then use it a playroom in the evening, the space is multipurpose. You can claim the pantry in your kitchen as a home office only when you don't use it to store groceries too.
Qualifying business activities not only include business management, marketing and sales, but also client meetings and customer presentations. When considering the space that you use for this deduction, you can also count facilities such as sheds on a leased property if you use this space for product storage, samples or business activities.
IRS Home Office Deduction Tools
The
IRS Publication 587 (2018), Business Use of Your Home has worksheets that help you calculate the portion of your rent that you can claim as a tax deduction. This publication also has current regulations, examples and clarifications of the exclusive-use test and principal business location requirement. An added benefit for renters who want to take the home office deduction is a handy chart that details the differences in calculations and the right forms for homeowners and renters when claiming deductions for business use of a home.
Simplified Renters Home Office Deduction
For renters and other home-based business owners, the IRS offers a simplified calculation option to determine how much of your rent can be applied to your home office
tax deduction. Calculate the square footage of your eligible home office by multiplying the length in feet by the width in feet. With this method, 300 square feet is the maximum allowed.
For 2019
taxes, the IRS allows you to use a set amount of
$5.00 as the multiplier in your
tax deduction calculation. If your office space is 200 square feet, when you apply the IRS multiplier of
$5.00, your home office deduction is
$1,000.00. The largest possible deduction using the simplified method is
$1,500.00.
Regular Renters Home Office Deduction
Depending on the size of your home office and the amount of your rent, you might fare better or worse with the more commonly used regular calculation. This method uses a percentage of total space in your rental that you are using for your business to calculate the deductible amount of your rent. If your rental unit is 1,000 square feet and your dedicated home office space requires 250 square feet, the part of your rent that can deduct is 25 percent. Multiply the rent you paid annually by this percent to calculate your deduction.
Changing Your Home Office Deduction Method
Because business and personal circumstances can change, the IRS allows you to switch between the simplified and regular home office deduction methods every
tax year. However, you must use the same
tax year period for calculations if you switch, whether it is a calendar year or a fiscal year.
Topic No. 509, Business Use of Home
www.irs.gov
Tax Tip 2022-37, March 9, 2022 — Rent is any amount paid for the use of property that a small business doesn’t own. Typically, rent can be deducted as a business expense when the rent is for property the taxpayer uses for the business.
www.irs.gov
