Home Office Calculation Worksheet

Taxpayer Name:

Home Address:

Tax Year:

⚠️ IRS Requirements for Home Office Deduction The home office must be used exclusively and regularly for business. It must be either (1) the principal place of business, or (2) a place used to meet clients/customers, or (3) a separate structure used in connection with the trade or business. Documentation required: floor plan, photos, square footage calculation, proof of exclusive business use.

Step 1: Calculate Square Footage & Business Percentage

Description	Square Feet	Percentage
Total Home Square Footage
Home Office Square Footage (area used exclusively for business)
Business Use Percentage

Method 1: Simplified Method (Safe Harbor)

💡 Simplified Method Benefits: Maximum deduction of $1,500 per year ($5 per square foot, up to 300 sq ft). No depreciation calculations, no depreciation recapture when selling home, minimal recordkeeping requirements. Can switch between methods year to year.

Description	Amount
Home Office Square Footage	0 sq ft
Square Footage Used for Calculation (lesser of office sq ft or 300)
Rate per Square Foot	$5.00
Simplified Method Deduction

Method 2: Regular Method (Actual Expenses)

💡 Regular Method Benefits: Can deduct actual expenses which may exceed simplified method limit. Includes direct expenses (100% deductible) and indirect expenses (prorated by business percentage). Requires detailed recordkeeping and depreciation calculation. Warning: Depreciation must be recaptured when selling home.

A. Direct Expenses (100% Deductible)

Expenses that benefit only the home office area (repairs, painting, etc.)

Expense Description	Amount
Office repairs and maintenance
Office painting/decorating
Office security system (if separate)
Other direct expenses
Total Direct Expenses

B. Indirect Expenses (Prorated by Business %)

Expenses that benefit entire home - deduct business percentage only

Expense Type	Total Amount	Business %	Deductible Amount
Mortgage Interest
Property Taxes
Homeowners Insurance
HOA Fees
Utilities (electric, gas, water)
Trash/Recycling
Home Security System
General Repairs & Maintenance
Lawn Care & Snow Removal
Pest Control
Total Indirect Expenses

C. Depreciation (Business Portion of Home)

⚠️ Depreciation Recapture Warning When using the regular method, you must depreciate the business portion of your home. This depreciation must be "recaptured" (taxed at 25%) when you sell the home, even if you qualify for the capital gains exclusion. This is one reason why the simplified method may be preferable for some taxpayers.

Description	Amount
Home Purchase Price (or FMV when business use began)
Capital Improvements
Total Basis
Business Use Percentage
Business Portion of Basis
Depreciation Period (MACRS - 39 years for home office)	39 years
Annual Depreciation Deduction

Regular Method Total Deduction

Category	Amount
Direct Expenses (100% deductible)
Indirect Expenses (prorated)
Depreciation
Total Regular Method Deduction

Method Comparison & Recommendation

Simplified Method

$5 per sq ft, max 300 sq ft

✓ No depreciation recapture
✓ Minimal recordkeeping
✓ Can switch methods yearly

Regular Method

Actual expenses + depreciation

✓ Higher potential deduction
⚠ Depreciation recapture
⚠ Extensive recordkeeping

✅ Advisor Recommendation

Simplified Method - Total Deduction: $

Regular Method - Total Deduction: $

Rationale:

CONFIDENTIAL: Retain for IRS compliance (minimum 7 years). Include photos, floor plan, and exclusive use documentation.

Home Office Calculation Worksheet

Strategy #9: Home Office Deduction (IRC §280A)

A. Direct Expenses (100% Deductible)

B. Indirect Expenses (Prorated by Business %)

C. Depreciation (Business Portion of Home)

Regular Method Total Deduction

Simplified Method

Regular Method

✅ Advisor Recommendation