woman working in home office

What You Need to Know About Taking a Home Office Deduction

Learn the pros and cons of taking a home office deduction on your taxes, including eligibility requirements, tax savings, and potential audits

Working from home has become increasingly popular in recent years, and the COVID-19 pandemic has only accelerated this trend. For many self-employed individuals and employees who work from home, taking a home office deduction on their taxes can be an attractive way to reduce their tax burden. However, it’s important to understand the pros and cons of this deduction before you decide to take it.

What is a Home Office Deduction?

First, let’s define what a home office deduction is. If you use a certain percentage of your home exclusively for business purposes, you may be eligible to deduct some of your home expenses on your tax return. The home office deduction allows you to deduct a portion of your rent or mortgage interest, utilities, insurance, and other expenses related to your home office.

Pros and Cons of the Home Office Deduction

Now, let’s take a closer look at the pros and cons of taking a home office deduction.


Tax savings: The most obvious advantage of taking a home office deduction is that it can lower your tax bill. You can save money on your taxes by deducting some of your home expenses, which lowers your taxable income.

Simple to calculate: The IRS has an easy method to calculate your home office deduction, so you can easily figure out how much you can deduct. You can deduct $5 per square foot of your home office, up to a maximum of 300 square feet.

Can increase your home’s value: If you own your home, making improvements to your home office can increase your home’s overall value. This can be a great investment, especially if you plan to sell your home in the future.


Strict eligibility requirements: In order to take a home office deduction, you must meet strict eligibility requirements. For example, your home office must be used exclusively for business purposes, and it must be your primary place of business. You may not be able to take this deduction if you don’t work from home full-time or if your employer provides you with a workspace.

Complex to calculate: While the simplified method for calculating your home office deduction is easy to use, it may not provide the most accurate calculation. If you have a larger home or more complex expenses, you may need to use the regular method, which requires more paperwork and record-keeping.

May increase your chances of an audit: Taking a home office deduction can increase your chances of being audited by the IRS. This is because the home office deduction is often abused or misunderstood, and the IRS is more likely to scrutinize these deductions to ensure that taxpayers are following the rules.

Saving Money on Your Taxes

Taking a home office deduction can be a great way to save money on your taxes, but it’s important to carefully consider the pros and cons before deciding whether to take this deduction. If you meet the eligibility requirements and can accurately calculate your deduction, it may be worth taking. However, if you’re unsure or your expenses are too complex, it may be better to forgo this deduction and avoid the risk of an audit.

K&B Tax Services is here to help you with self-employment taxes.

By Leslie Radford