Home office deduction benefits small business owners

Small business owners who work from home may qualify for a home office deduction.

They have two options for figuring this deduction.

The regular method  divides expenses of operating the home between personal and business use. Self-employed taxpayers file Form 1040, Schedule C, and compute this deduction on  Form 8829.

The simplified method, has a rate of $5 a square foot for business use of the home. The maximum deduction is $1,500.

Special rules apply for certain business owners:

  • Daycare providers complete a special worksheet, found in Publication 587.
  • Self-employed individuals use Form 1040, Schedule C, Line 30 to claim deduction
  • Farmers claim the deduction on Schedule F, Line 32.