Tax season in the United States may seem far away, but preparing ahead of time makes all the difference. Every year, millions of self-employed workers and small business owners face forms, numbers, and questions about what can and cannot be deducted. And if you work from home, you may be entitled to savings that many people don’t even know exist.
The IRS knows this, which is why it provides taxpayers with a guide that answers many of the most frequently asked questions. This tool not only provides information, it also helps you understand how to legally save part of your taxes if you use part of your home as an office or workspace. You don’t need to be an accountant or have technical knowledge. All you need to do is read carefully, understand a few criteria, and organize your information for the next tax year.
Save on your taxes if you work from home
If you are self-employed, a freelancer, or part of a partnership, you may be able to deduct certain expenses related to the use of your home for business purposes. But it’s not enough to just have your laptop on the living room table. The rule is clear: the space must be used exclusively and regularly as part of your business activity.
This means that you can deduct expenses if you use a room solely as an office, if you receive clients there, if you store products there, or even if you provide childcare services at home. In these cases, you could deduct part of your rent, property taxes, electricity, insurance, and even minor repairs.
However, if you use the same space to work and watch TV series at night, it is no longer valid. Exclusive use is one of the most important requirements. It is also essential that it is your main place of business, i.e., the place where you perform administrative tasks or most of your daily work.
Deduct up to $1,500 in taxes with the IRS
The IRS allows two methods for making the deduction. The traditional method, called the regular method, consists of dividing expenses between personal and business use of the home. For example, if 10% of your home is used for your business, you can deduct that 10% of certain expenses. This calculation is reported on Form 8829, along with Schedule C if you are self-employed.
The other option is much simpler: the simplified method. Here, you only need to know how many square feet you use for your professional activity. You can deduct $5 per square foot, up to a maximum of 300. So, if you work in a 150-square-foot space, you could deduct $750 without having to deal with invoices or percentages. This deduction is included directly on Schedule C.
The choice of method depends on your situation. The regular method may allow you to deduct more if your expenses are high, but it takes more time and paperwork. The simplified method is more straightforward, although it does not allow you to carry over undeducted losses to subsequent years, as the other method does.
In addition, if you are part of a partnership, are engaged in agriculture, or provide childcare services, you can also apply these deductions using specific forms such as Schedule E or Schedule F, as applicable. The important thing is to know that this type of deduction exists and that it can help you pay less tax if you meet the requirements. Being clear about this possibility before tax season arrives can mean significant savings that you will notice in your pocket.
