Home Office & Expense Deductions Check for Freelancers

If you work for yourself, you can deduct ordinary and necessary business expenses from your self-employment income under IRC §162, which lowers both your income tax and your 15.3% self-employment tax. The home office deduction is one of the most valuable, and one of the most misunderstood. Under IRC §280A(c)(1), part of your home only qualifies if you use it regularly and exclusively for your business, and it is your principal place of business (including where you do admin and management with no other fixed location), a place you meet clients, or a separate structure. You can claim using the simplified method of $5 per square foot for up to 300 square feet (Rev. Proc. 2013-13), or the regular method on Form 8829 using actual costs such as rent, mortgage interest, utilities, insurance and depreciation.

Getting it wrong is costly. The IRS can disallow expenses you cannot substantiate, and IRC §274(d) sets strict written record requirements for vehicle use, travel and gifts. Personal expenses are never deductible (IRC §262), and the home office deduction cannot create a loss: it is capped at your business income, with any excess carried forward (§280A(c)(5)). If you also have a W-2 job, unreimbursed employee expenses are not deductible at all for that job. Disallowed deductions bring back tax, interest and a 20% accuracy-related penalty under IRC §6662. This check helps you work out what you can claim, which method suits you and whether your records would stand up.

Use this free tool to check whether you qualify for the IRS home office deduction as a freelancer or 1099 contractor, which method gives you the bigger deduction, and whether your mileage and expense records would survive an audit.