When you're self-employed, the home office deduction can take a big bite out of the amount of self-employed tax you owe. You can claim a deduction for a home office if you have a space at home that you use exclusively and regularly for your business.

Exclusive use is a key component of the criteria for the deduction. Your home office can be an actual room or group of rooms. But it can also be an area of a room you use for other things (dining room, spare bedroom), as long as the business area is clearly separated and it's obvious that personal activities are excluded from it.

Do you store inventory at your house? If it's in an area outside your office space (like a garage or closet), you can include that as part of your home office deduction too. You can include only space the inventory occupies (like a 4" x 3" corner, for example), not the entire garage or closet.

Good to know:

  • You can't deduct more than the net profit your business makes each year. However, like other operating losses, you can carry these forward into future tax years.
  • You can't deduct expenses for activities that take place outside of your home, such as lawn care and gardening. This is because your home office and business activities must take place within your home, not outside of it.

There's more to know about the home office deduction. Check out these articles:
Square footage: Why it matters for your home office
How we handle the home office deduction
Claiming home office deduction when you work away from home

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