Should You Claim a Home Office Business Deduction?

As a 1099 mom, there are certain expenses that you are able to claim that may lower your tax burden.  One of the more popular ones is the home office deduction, which is available whether you own your own home or rent a home or apartment.

Requirements to Take a Home Office Business Deduction

1.  Is your home office space used exclusively for business? 
If you have a small table set up in your living room, you can't claim the deduction because the space is also used by the family.  However, if you've turned your spare bedroom into your office and it's used only for business, the space qualifies.

2.  Is it your principal place of business?
If you work at an office 75% of the time and work from home 25% of the time, you can't claim the deduction because the space isn't your principal place of business.  However, a true 1099 mom who works primarily from home in a designated home office space will be able to claim the deduction.

Two Options to Claim This Deduction

There are two primary ways to claim this deduction.

Regular Method

Using this method, you take the square footage used for your office and divide it by the total square footage in your home.  This will give you the percentage of space in the home your office takes.  Then, you add up expenses such as your mortgage interest, insurance, utilities, repairs and depreciation and multiply that amount by the percentage you computed earlier.  That gives you the total expense for your home office space.  

Simplified Option

Starting this year, 2014, the IRS has begun to offer a simplified option for claiming the home office deduction.  Rather than computing your expenses and multiplying them by the percentage used for the office space in the home, you simply multiply the square footage of the office space (up to 300 sq. feet) by $5.  This is your deduction amount.

While this is a great deduction that can lower your tax burden, some choose not to take it as they worry doing so will make an audit more likely.  You may want to consult with an accountant to see if this deduction is right for you.

More details can be found at the page, Home Office Deduction.

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