Short videos on the tax questions owners ask most.

Work for yourself from home? Then part of your rent or mortgage interest, and part of your power bill, could become a business deduction. In the next few minutes, you will see who qualifies, the two ways to figure it, and the one catch homeowners need to know before they claim it.

First, who can take it. You need your own business: self-employed, a side business, or a contractor paid on a 1099. If you work from home as an employee for someone else's company, you cannot take it, even if your job requires you to work from home.

Here is the main test. The space is used only for your business, and used regularly. Only for business means no guest bed, no homework, and no family TV in that space. A spare room set up as your office can count, and even part of a room can count if that part is only for your business. The kitchen table does not.

In most cases, it also has to be your main place of business, and that does not mean clients have to come there. If you do your billing, scheduling and paperwork there, and you do little of that work at any other fixed location, it can count. A space where you regularly meet clients in person can count too. So can a detached studio or workshop used only for the business. Home daycares and space used to store inventory follow their own special rules.

Now the money. Way one is the standard way. Measure the office, and multiply the square feet by $5, up to 300 square feet. So the most this way can give you is $1,500. There are no bills to add up, and no depreciation to deal with when you sell your home.

Way two is the actual expense way, and it uses your real costs. Divide the office's square feet by your home's square feet. That is your business percentage. That share of your rent, utilities, insurance and repairs can count, and a cost for the office alone, like painting that room, counts in full. Homeowners use mortgage interest, property taxes and depreciation in place of rent.

Here is an example. Say the office is 200 square feet in a 2,000 square foot apartment. That is 10 percent. Rent is $1,800 a month, and utilities are $250 a month. Ten percent of a full year of those costs is $2,460. The standard way on the same room is $1,000. In this example, the actual expense way gives you more than twice as much.

Now the catch for homeowners. Under the actual expense way, the office part of your home is depreciated. When you sell the home, that depreciation comes back as taxable gain, even if the rest of your profit is covered by the home sale exclusion. Renters do not face this, and neither does the standard way, for the years you use it. A detached studio has stricter rules when you sell.

Two more rules. For most costs, the deduction cannot be more than the business earned, so it cannot create a loss. Under the actual expense way, what you could not use carries to next year. Under the standard way, it does not. And you can choose whichever way pays you more, year by year.

Keep proof. Take photos of the office, sketch a simple floor plan with the measurements, and keep your rent or mortgage statements and your utility bills. Missed it on a past return? You can usually amend up to three years back, using the actual expense way.

Want to know if your space counts, and which way pays you more? I am Tevin Mitchell, an Enrolled Agent in Port St. Lucie. Book a free call at probooksandtax.com.

Transcript of the video posted October 3, 2026.