1. Qualifying Requirements
To claim the home office deduction, you must regularly use a portion of your home exclusively and regularly as your principal place of business. Exclusive use means the space is not used for personal purposes. Regular use implies consistent, ongoing use—not occasional or incidental.
2. Principal Place of Business
Your home office qualifies as your principal place of business if it is used for administrative or management activities and there is no other location where you conduct these activities. For signing agents, this may include scheduling, bookkeeping, billing, and order processing.
3. Simplified Method
The simplified method allows a deduction of $5 per square foot of home office space, up to 300 square feet ($1,500 maximum). This method requires minimal documentation and does not consider actual expenses. No depreciation deduction is available under the simplified method.
4. Regular Method
The regular method calculates actual expenses based on the percentage of your home used for business. Calculate business use percentage by dividing home office square footage by total home square footage. Apply this percentage to mortgage interest, insurance, utilities, repairs, and depreciation.
5. Expenses That Vary
Certain expenses are deductible only to the extent they relate to the business portion of your home: utilities, insurance, repairs, and maintenance. Direct expenses such as painting or repairing only the office space are fully deductible.
6. Depreciation Considerations
Using the regular method allows depreciation on the business portion of your home. However, depreciation recapture may apply when you sell your home. The simplified method avoids depreciation entirely but limits the maximum deduction.