This question has come up a few times in messages, so I thought it would be worth going over for the good of the whole group. As always this is not tax advice, but general information for those who have to pay U.S. taxes. The home office deduction or business use of the home deduction is still available. In short it allows you to take a deduction from your income for the portion of your home that you use for your business. For example a cam girl might have dedicated camming room and some equipment at home to allow her to work. A dancer who does parties and the like might have an office where she keeps her books, books appointments and stores costumes. To qualify for the deduction, there is a two part test.

First you must regularly and exclusively use that part of your home to conduct business. This means it is genuinely dedicated work space and cannot also be used as a toy room, gym and so forth.

Second it must be your principal place of business. If you have more than one business location, the home office will still qualify if it is used regularly and exclusively for administrative or management activities, such as book-keeping, or to meet with patients, clients or customers.

If both requirements are met, the next step is to calculate the deduction. The formula starts with determining the percentage of your home that is devoted to business use. This can range from a whole or part of a room to a freestanding structure on the property. Once the square footage is known, tax payers have two methods of choose from as the multiplier: the actual expenses or the simplified method.

Actual expenses have been around the longest. Under this method, taxpayers need to determine and keep a record of the direct and indirect expenses associated with maintaining their home office. Direct expense are those that are only in the area used for business, such as painting or repairs. Therefore, they are deductible in full. Indirect expenses are those that are needed to run the entire house such as insurance, property taxes, mortgage interest and HVAC repairs. Those are deductible based on the percentage of the home used for business. Furthermore, depreciation expense can be taken using the straight-line method over 39 years. Unrelated expenses, such as lawn care and a bathroom remodel are not deductible.

Alternatively, starting in 2013, taxpayers could use the simplified method. In accordance with its name, the is method was introduced to simplify the calculation and record keeping requirements that can be burdensome or small business owners. It uses a prescribed rate of $5.00/square foot. It is important to note that is method is essentially a safe harbor election and once it is made for a tax year, it is irrevocable. Thus, you cannot later amend a return to use the actual expense method. You can switch, though, from tax year to tax year. So, in a year where you have significant direct expenses, it may be advantageous to switch. However, the simplified method does take into account depreciation, so you cannot take both depreciation and the simplified method.

In 2018 the Tax Cuts and Jobs Act (TCJA) drastically changed Form 1040, where the home office deduction is taken. Those who are unaffected by the changes can still take the home office deduction, though not on form 1040. For small business owners, the deduction is taken on either Schedule C or F and complete and attach Form 8829. For partners report the home office deduction on Schedule E with the line description "un-reimbursed partnership expenses." Further the TCJA suspended the 2% floor required for the deduction through tax year 2025.

HTH,
Z