Per Diem Rates from the U.S. General Services Administration
Search by city, state or ZIP code, or by clicking on the map. You can also use the new per diem tool to calculate trip allowances
Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
The Home Office Deduction
If you're self-employed, the home office deduction can save you taxes because it can reduce net business income reported on Schedule C (or Schedule F for farmers). Whether you're a renter or homeowner, you may qualify for the home office deduction.
You Must Have Business Income
If you have no income for the year in your business or profession, you may not claim the home office deduction. For example, if you're a writer and do not receive an advance during the year or any income related to your writing, you may not claim the home office deduction.
Home Office Deduction Limited to Net Business Income
If you have net income from your business, the home office deduction is limited to your net income regardless of the method you use.
May Not Create A Loss
Since you may only claim a home office deduction up to the amount of net profit from your business, a net loss may not be created by claiming the home office deduction.
If Your Sell Your Home
If you sell your home during the year, you must increase the tentative profit by any net gain or decrease tentative profit by any net loss that is allocable to your home office and reported on Schedule D or Form 4797.
Figuring You Home Office Deduction
There are two options available for claiming the home office deduction:
- The Simplified Safe-Harbor Method (Simplified Method for short)
- The Actual Expense Method
Simplified Method
Under the simplified method, the standard home office deduction amount is $5 per square foot up to 300 square feet of the area used regularly and exclusively for business. The maximum deduction is $1,500. The deduction may not exceed business net income (gross income derived from the qualified business use of the home minus business deductions).
If you share your home with someone else who uses the home for a separate business that qualifies for this deduction, each of you may make your own election, but not for the same portion of the home.
If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified safe-harbor method applies to all your qualified business uses of your home. However, you are still limited to a maximum of 300 square feet for all of the businesses you conduct in your home that qualify for this deduction.
If you conduct more than one business that qualifies for the deduction, allocate the actual square footage used (up to a maximum of of 300 square feet) among your qualified business uses in any reasonable manner you choose. However, you may not allocate more square feet to a qualified business use than you actually use in that business.
Advantages of the Simplified Option:
The main advantage of the simplified option is its simplicity. You don't have to deal with Form 8829, which includes four sections and 43 lines. Just follow the instructions for line 30 of Schedule C.
Disadvantages of the Simplified Option:
Unlike the actual expense method, where you may carry over the non-deductible portion of you home office expense due to the income limitation, under the safe-harbor method, the portion of the safe-harbor amount that is not deductible because of the income limitation may not be carried over and is lost forever.
For example, if tentative net profit on Schedule C is $1,200 and your safe-harbor deduction is $1,500 (the maximum), the excess $300 over tentative net profit may not be carried over to the following year and is lost forever.
Actual Expense Method for Claiming the Home Office Deduction
If you use the actual expense method to compute your home office deduction you may deduct both direct and indirect expenses associated with your home.
Direct Expenses:
Direct expenses are expenses directly related to the actual space used for your home office. One hundred percent of direct expenses are deductible. For example, if you pay $200 to paint your office, you may deduct the $200 as a direct expense on Form 8829. Under the simplified option for figuring the home office deduction, you may not claim direct expenses.
Indirect Expenses:
Indirect expenses are expenses associated with the entire residence, including your home office. For example electricity, insurance, water, the cost of a burglar alarm monitoring service, and trash disposal.
Indirect expenses are allocated to your home office using an allocation percentage. A common basis for figuring an allocation percentage is square footage. For example, if your residence is 2,000 square feet and your home office is 200 square feet, your allocation percentage is 10% (200/2,000). Simply multiply your annual indirect costs by 10% to determine your deductible amount.
You May Switch Back and Forth
You make the decision to use the simplified safe-harbor method year to year. This means you may switch back and forth each year from the actual expense method to the simplified method. However, once an election is made to use the safe-harbor method for a particular tax year, it is irrevocable for that particular year.
No depreciation is allowed for the years in which the simplified safe harbor option is elected. Depreciation is allowed in the years in which the actual expense method is used. Revenue procedure 2013-13 has examples of how depreciation is calculated in a year subsequent to a year the safe-harbor method is used. Since no depreciation deduction may be claimed when using the safe-harbor method, recapture of depreciation is not necessary if you sell your home. The depreciation deduction allowable for that portion of the home used in a qualified business is deemed to be zero.
Form 8829
If you use the actual expense method, you must report deductible home office expenses on Form 8829. Part I is used for showing the space allocated to business use; Part II for reporting deductible expenses allocated to business use; Part III for figuring depreciation on the business area; and Part IV for carryover to 2022 of expenses not allowed in 2021 because of income limitations applied in Part II.