# Two Methods for Calculating Home Office Expense Deductions

The home office expense deduction can save you some significant money at tax time if you're and work out of your home, but it's not for the faint of heart. In fact, it's complicated enough that the Internal Revenue Service has dedicated a 32-page book ( to explaining its intricacies.

### The Simplified Method for Calculating Home Office Deductions

You have two options for calculating the amount of your deduction. One is far easier than the other, but you might shortchange yourself if you use it.

The IRS offers a which may be appropriate if your home office is on the small side, up to 300 square feet. Multiply the area by \$5 per square foot. There's your deduction. Obviously, the smaller your space, the less of a deduction you can receive.

The two criteria above still apply. The area must be used regularly and exclusively, and it must be your principal place of business.

### "Percentage of Your Home" Method for Home Office Deductions

The simplified option has been available since 2013. Before that, home office entrepreneurs had to go through some complicated calculations to arrive at their deductions, and you might still want to do this because it could ultimately save you more money.

The more complicated option uses IRS Form 8829 to calculate the home office deduction. This requires that you determine the percentage of the total area of your home, then the area that you use exclusively for business purposes. If the total is 2,500 square feet, and if your work area is 250 square feet, you're entitled to deduct 10 percent of qualifying home expenses because they're dedicated to your business. Divide the total usable area of your home by your work area to arrive at your percentage.

You can take a percentage of allowable home-related expenses, based on the percentage of your home used for business, including these expenses:

• Casualty losses (with limits)
• Mortgage interest
• Real estate taxes
• Security system
• Homeowner's insurance
• Rent, if you don't own your home