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I'm a sole proprietor with an office in my apartment and I'm confused on how to calculate my deductions. Suppose the office is 300 sq ft. The apartment is 600 sq ft. Rent is $2000 per month.

I see I can deduct a portion of rent as an office expense using 'Standard' or 'Calculated' rates.

By the standard rate, it seems I should be able to deduct $5/sqft * 300 sq ft = $1500. Is this correct? And is this per month, or the total for the year?

By the regular rate, it seems I should be able to deduct 50% of my rent = $1000. Is this correct? And is this per month, or a total for the year?

Edit: background from https://www.irs.gov/businesses/small-businesses-self-employed/simplified-option-for-home-office-deduction

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    Claiming a 300 sq. ft. office area in a 600 sq. ft. apartment is practically begging the IRS to conduct a field audit of your self-employment business. – Dilip Sarwate May 8 at 21:38
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    OP is using the maximum size allowed under the standard method, hopefuly, as an example, not the actual room size. OP, do you know that the area must be 100% used for the business; no other usage? – mkennedy May 8 at 23:04
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    @se123 No. A home office must be used exclusively for business. You may not use it part time for something else and prorate the deduction. It is all or nothing. – Matt May 11 at 3:23
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    @DilipSarwate "serving as an example, instance, or illustration this story is exemplary of her style" merriam-webster.com/dictionary/exemplary – Acccumulation Jun 11 at 21:06
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    @Acccumulation No, the primary meaning of exemplary is worthy of emulation (a shining example if you will) and it is never used to describe one's own work or achievements. To quote the illustration from the dictionary "this story is exemplary of her style" is perfectly OK; to call one's own writings exemplary is to reveal oneself as being an egotistical pompous ass (or someone with hardly any writing skills) – Dilip Sarwate Jun 12 at 3:51
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You need to look into this guidance from the IRS:


Requirements to Claim the Home Office Deduction

Regardless of the method chosen, there are two basic requirements for your home to qualify as a deduction:

  • Regular and exclusive use.
  • Principal place of your business.

Regular and Exclusive Use.

You must regularly use part of your home exclusively for conducting business. For example, if you use an extra room to run your business, you can take a home office deduction for that extra room.


This means you cannot use this area of your home for any other purpose than business use. You shouldn't even be entering it except for business purposes (if the room connects two rooms, the IRS will expect that you to prove that you do not regularly pass through your office). As such, it's unlikely that your home office would take up 50% of your apartment. As @Dilip Sarwate pointed out, this would likely trigger an audit. You need to be careful in determining whether your home workspace constitutes a home office by the IRS' standards.

Simplified

You've got it just right. Multiply the square footage of your office by 5 to get the correct dollar value. Put this amount in Line 30 of your Schedule C.

Regular

You'll need to fill out Form 8829 to support your declaration of expenses in Line 30 of your Schedule C. This will ask you to provide the full expense for the apartment and then require you to multiply it by the ratio of square footage. In your example, the home office is 50% of the total area. You would multiply all expenses by half to get your total business expenses.

  • Thank you very much for your answer and summary. This is quite helpful. Do you know if that deduction amount is the total for the year? Or is it per month? – se123 Jun 13 at 4:24
  • Your taxes are considered on an annual basis. It's up to you to calculate and support your yearly spend on various expenses. – Cilantro Ditrek Jun 13 at 13:59

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