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.