Tax season might feel like it’s still far away, but getting ready early can help you save money and avoid stress later. Many self-employed people and small business owners in the USA deal with lots of forms and rules every year. If you work from home, you might be able to claim some deductions that reduce your tax bill – and many people don’t even know about these savings.
The IRS has created a helpful guide to explain how these home office deductions work. You don’t need to be an expert in taxes – just understand a few basic rules and keep your work-related records clear and organised.
Can You Get a Tax Deduction for Working from Home?
If you’re self-employed, a freelancer, or part of a business partnership, you may be allowed to deduct some of your home expenses. But there’s a rule – you must use part of your home only for business, and you must use it regularly. Just placing a laptop on your dining table won’t count.
This means you can deduct expenses like rent, electricity, property tax, repairs, or insurance – but only if the space is used only for work. You can also claim deductions if you meet clients at home, store inventory, or run a childcare service from your house.
However, if you use the same room for watching TV or sleeping, the space doesn’t qualify. The IRS is strict about this – it should be your main business place, like where you do your paperwork or manage your daily tasks.
Two Methods to Claim the Deduction
The IRS allows two ways to calculate your home office deduction:
Regular Method
This is a bit detailed. You must divide your home’s expenses between personal and business use. For example, if your home office takes up 10% of your house, you can deduct 10% of your electricity, rent, etc. This is done using Form 8829, which goes along with Schedule C.
This method can give you a bigger deduction, especially if your expenses are high. But it takes more time, and you need to keep all your bills and documents.
Simplified Method
This is the easier option. You just need to know how many square feet you use for your business. You can deduct ₹5 (or $5 in USD) per square foot, up to 300 square feet. So if your office is 150 sq. ft., you can deduct $750.
You don’t need to keep track of bills. You just include the amount directly in your Schedule C. However, this method has limits. You cannot carry forward any unused deductions to the next year.
Who Else Can Use This Deduction?
Even if you’re in a partnership, run a farm, or offer childcare from home, you may still qualify. You just need to use the right form – like Schedule E for partnerships or Schedule F for farming.
What matters most is understanding the rules before the tax season starts. That way, you’ll be ready with your documents, and you won’t miss out on valuable tax savings.