Should I use the simplified or the actual home office deduction?
Short answer
Most creators get a larger deduction from the actual-expense method, which writes off the business share of rent or mortgage costs, utilities and insurance, than from the simplified method, which allows $5 per square foot up to 300 square feet.
Otavio Mayole, Co-founder, DeCypher FinancialsUpdated
The simplified method caps out at $1,500 a year. That's why we call it the lazy method. If you pay real rent or a mortgage, the actual-expense method is usually much bigger.
How the actual-expense method works:
- Measure the space you use only for business: your filming room, studio corner or editing desk. It has to be used regularly and exclusively for the business.
- Divide it by your home's total square footage. That's your business percentage.
- Apply the percentage to rent or mortgage costs, utilities and renter's or homeowner's insurance.
We teach creators to use as much of their home for content as they really can. If you have a spare bedroom you only use to film, it counts. Very high percentages draw attention, so we document the space.
Two things to know:
- The deduction generally can't create a business loss. If your business lost money, it may carry forward instead.
- If you're an S-Corp, the business reimburses you for the home office through an accountable plan rather than you deducting it directly.
These are not guarantees. Every creator's situation is different.