Myth: You Can’t Deduct Home Office Expenses

A lot of business owners avoid claiming a home office deduction because they’ve heard it will “trigger an audit” or isn’t allowed unless you’re a large business with formal office space.

That’s completely false.

Why "Home Office Deduction" Myth Is Wrong

The IRS allows home office deductions — and has for years. If you run your business from home and meet the basic criteria, this deduction is legal, legitimate, and often substantial.

Here’s what the IRS says: If part of your home is used regularly and exclusively as your principal place of business, you may qualify to deduct related expenses like rent, utilities, insurance, and repairs.

Avoiding the deduction out of fear or confusion could mean missing out on thousands of dollars in legitimate write-offs each year.

What Business Owners Should Understand Instead

If you meet these two tests, you’re likely eligible:

1. Regular and Exclusive Use: The space must be used only for business. A corner of the living room doesn’t count unless it’s clearly designated and used only for business activities.

2. Principal Place of Business: You must conduct substantial administrative or managerial work from the home office — or meet clients there regularly.

   
   

Even a solopreneur working from a small home office can benefit. And there’s even a simplified method that lets you deduct $5 per square foot (up to 300 sq. ft.) — no receipts required.

Action Steps to Avoid This Costly Mistake

✅ Assess your space honestly.

• Is the area used exclusively for your business?

• Do you use it regularly to run or manage your business?

  
  

✅ Choose your deduction method.

• Actual expense method: Requires documentation of mortgage/rent, utilities, repairs, etc.

• Simplified method: Easier to calculate — just square footage × $5.

  
  

✅ Keep good records.

• Take photos of your office space.

• Track all related expenses if using the actual method.

• Maintain a simple log of time spent working there, especially if the office is used intermittently.

  
  

✅ Work with a tax advisor.

• Development Theory’s tax experts can review your space, recommend the best deduction method, and make sure you stay IRS-compliant without overpaying.

Final Thoughts

The home office deduction is real, IRS-approved, and a smart way to reduce your tax burden. Don’t let outdated myths keep you from legitimate savings.