The Home Office Deduction 101: Simplified Method vs. Actual Expense Method

The Home Office Deduction 101: Simplified Method vs. Actual Expense Method

Even though we don’t currently prepare tax returns for clients at my financial planning firm, tax is a topic that comes up a lot.  Many of our clients own businesses, and most of them share two opinions:

Alongside that there are several tax related questions that come up fairly frequently with our clients.  One of them is the home office deduction.  How can you take it?  Are you even eligible?  What can do to take a larger home office deduction this year?  What are your options?

Whereas employees and small business owners alike were eligible to take the deduction prior to 2018, the Tax Cut & Jobs Act eliminated home office expenses as a miscellaneous itemized deduction.  That means that rather than deducting home office expenses on Schedule A as an itemized deduction, they’re now claimed on Schedule C.  And since Schedule C only contains information related to self-employment, the tax law change essentially means that employees are no longer eligible to take the deduction.

For business owners still eligible to take the home office deduction, there are two options for calculating the amount: the simplified method and the actual expense method.  This post will cover both in detail, and explain what you need to know to take the deduction yourself.

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