If you use a portion of your home to conduct self employed income, you may be eligible for the deduction for business use of your home. You can use either the simplified or actual method to claim this deduction. The deduction does not have to be an office and is available if you rent or own your home.
The simplified method provides a rate of $5 per square foot for up to 300 square feet. This is an average rate the IRS determines it costs to maintain the average home. This method prevents you from having to gather and retain receipts for all expenses.
The actual method takes the square foot of your business space divided by the square footage of your entire house. This percentage is then applied to the actual expenses, which can include mortgage interest, taxes, maintenance/repairs, insurance, utilities, etc. Using the actual method requires you to depreciate the space, therefore possibly triggering taxable income when selling your home.
The tax code states that the space must be your principal place of business. This is slightly confusing, as your principal place of business does not translate to your principal office. As long as you conduct at least administrative or management chores, the space is considered your principal place of business.
Every scenario is different, therefore this general advice cannot be applied directly to your situation and is not intended to be tax advice. If you have concerns about the home office deduction, it is best practice to consult with a tax professional.