As a small business owner, your focus is probably on serving your clients at any expense. But did you know that you can earn some money back each year with a home office tax deduction?

How Home Office Tax Deduction Works For Small Business Owners | Emily Volz Bookkeeper & CFO

Two Ways To Save Money Based On Your Home Office

A home office tax deduction provides entrepreneurs working out of their homes with much-needed financial relief! If your home is where you run your business (even just SOME of the time!), it is time that you learned about home office tax deduction. 

There are two main things you can account for here: a reimbursement for your physical office space in your home, and reimbursement for office supply expenses. 

Related: 1099-NEC Forms: What You Should Know (& How to File Them Successfully)

How To Take A Home Office Tax Deduction Based On Having A Home Office

Now that we’ve established that there are two main ways to take the home office tax deduction (based on space and supply expenses, respectively), let’s focus on one at a time in more detail. 

When it comes to calculating your deduction for your office itself, there are two methods—but stick with me! This isn’t as complicated as it sounds. 

Your first option is to compile all of your home-related bills and expenses. This includes things like mortgage or rent, electricity, internet, gas, water, and more. Once you’ve put together all of those expenses, you’ll need to do a little math. 

Divide the square footage of your office by the square footage of your home. Convert that number to a percentage—and that’s the percent of those expenses you can deduct!

Your second option is a little bit simpler. Many work-from-home entrepreneurs prefer a method based on square footage, rather than dollar figures. This simplified way of filing for a home office tax deduction applies to anyone with an office space smaller than 300 square feet. 

If that’s you, you may want to forego the headache of compiling receipts and just go for the $5 payout for each square foot of your business space. This method hurries the tax process along and gets you back to your clients a bit faster. 

How To Write Off Your Home Office Expenses and Get Reimbursed

If you find yourself surrounded with work things beyond just a laptop for your small business (or if you’ve spent a good chunk of change on supplies this year versus other years) it could be worth your while to crunch the numbers! In addition to the actual home office tax deduction, you can write off your expenses and receive reimbursement. 

Comb through this list for inspiration. You can include the cost of any of the following things in your deduction:

But be warned: the materials that you list for your deduction must be used for business purposes only! Some innocent behaviors such as printing family photos off of your high-grade printer or using your office chair at the dinner table from time to time disqualify them from the list.

Related: Money Saving Trick: The Best Time of Year to Save Money

Who Qualifies For This Deduction?

Before you pop the champagne, consider whether or not you are even allowed to ask for a home office tax deduction based on your current setup. 

For example, laptop floaters who sometimes work at their kitchen tables and sometimes on their couches need not apply. You must have a dedicated and consistently-used office space to ask for a home office tax deduction from the IRS.

The good news is that as long as your workspace is reserved for only that, it can be pretty much anywhere! It doesn’t matter what sort of home you are living in—whether you choose to carve out your office in the basement, a spare closet, or the shed out back—the place where your business magic happens counts as a home office and is worthy of a home office tax deduction.

What Else Should You Know About The Home Office Tax Deduction?

The most important thing to remember when thinking about your deduction is to keep calm and keep at it! You deserve this tax break as much as the next guy, so don’t miss out just because you are stressed. 

Take the time to download and digest the information on the 8829 tax document. Seeing the tax form with your own eyes often makes the project more approachable. It also helps you to set up tax goals for the following year if you feel like you’ve dropped the ball filing receipts or designating an appropriate workspace in the past.

Lastly, it never hurts to talk with a tax professional. People do think about this stuff for a living—so leverage them! Odds are that the money you save by filing your taxes correctly, plus the knowledge you earn by working with a professional this time around, will sufficiently cover the cost of hiring them.

Want to make the home office tax deduction easier than ever before? My Home Office Calculator helps you skip the headaches by giving you the exact percentages to deduct from utilities, mortgage/rent payments, and even home improvement costs. It’s really an amazing tool that will save you tons of time and stress! 

It is worth the effort to file for a home office tax deduction. You work incredibly hard each year to help your small business reach new heights! So be sure to get every penny that you deserve for all of that diligence.

How Home Office Tax Deduction Works For Small Business Owners | Emily Volz Bookkeeper & CFO