How to Qualify for the Home-Office Tax Deduction

How Do I Do It?

To figure your deduction, divide the square footage of your office by the total square footage of your home. For example, if you have a 200-square-foot office and a 2,000-square-foot house, your office represents 10% of your home. As a result, you may deduct 10% of mortgage payments or rent, as well as utilities.

You also can deduct the cost of improvements and repairs to the space. For whole-house projects, you can deduct the office's percentage. "If you paint just your office, you can deduct 100%," Levine says. "If you paint your whole house, you can deduct 10% if the office takes up that percentage of the total space in your home."

One bill you can't deduct entirely is your first phone line, because it's considered personal. But you can track your business calls and deduct that amount.

You'll need to file Form 8829, which calculates business-related home deductions. If you're unsure whether the deduction is worth it for you, you might take a look at that form, and its instructions, to get a sense of what it requires.

Coming up next: More answers about the home-office deduction.

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