If you use your home for your business — whether to greet clients, work on bookkeeping or store roofing supplies — you may be entitled to deduct home office expenses from your business income. That includes whatever share of property taxes that you can assign to your workspace. If you own a home, you can write off all your property taxes if you itemize deductions. With a home office, you can write off a percentage of your tax bill on Schedule C even if you take the standard deduction.
1. Review the IRS rules to make sure that your home workspace qualifies for a tax deduction. Generally, you can claim the deduction only if you use part of your home for your business on a regular basis and use it exclusively for business. You can waive the exclusivity requirement in some cases, such as if you run a home daycare, or if you store supplies or inventory at home.
2. Measure the square footage your business space takes up. Divide that by the total square footage of your home. If your home office takes up 10 percent of your house, you can claim 10 percent of your property taxes as a deduction.
3. Multiply your tax bill by this percentage to determine your deductible property taxes. If you’ve used your home office for only part of the year, you must adjust your deduction accordingly. If you opened your home office Sept. 1, for instance, you could claim only one third of a full year’s deduction, as you used your home for business only a third of the year.
4. Total the expenses for business use of your home, such as property taxes, utilities, repairs and mortgage interest and record the result on form 8829. Write your net self-employment income, not counting the home office deduction, onto the form. Subtract the expense from the income. If your home office deduction puts you in the red, some of the expense will be disallowed or carried over to the next year.
5. Attach 8829 to Schedule C, or to Schedule F if you’re a farmer. Note the allowable home-office deduction on the form, then report the total business income on your 1040.
If your employer requires you to use part of your home for work, you may be able to claim this as a deductible business expense on Schedule A.
You must keep records to show the IRS that whatever home-office deductions you claim are valid, for example, property-tax records. The usual rule is that you keep them for three years after you file a return or two years after you pay, whichever is later.