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Jesus Morales is an Enrolled Agent and has 7 years of bookkeeping and tax experience. He enjoys hiking, traveling, and studying tax law.
August 2, 2024 April 27, 2022 Reviewed by Reviewed by
Jesus Morales is an Enrolled Agent and has 7 years of bookkeeping and tax experience. He enjoys hiking, traveling, and studying tax law.
August 2, 2024 April 27, 2022 Reviewed by Reviewed byOne of the biggest perks of working for yourself? Getting to write off your housing costs.
These days, plenty of people WFH, but only self-employed get a tax break out of it.
If you're a freelancer, independent contractor, or small business owner who uses your home for business purposes, the home office tax deduction can be huge. It lets you write off part of your rent and related expenses, including:
The only problem: Keeping track of all these write-offs can be a hassle. That's why we created this free home office deduction worksheet. Just hit "Make a copy,” and you'll be able to track all your home office expenses in one place.
We built this worksheet in Google Docs, so you can use it anywhere you want, for free: all you need is an internet connection. But if you'd like to download your copy and use it in Excel, you can do that too.
The worksheet is split up into three parts:
Let's go over how to use each section.
This section automatically calculates how much of your home you use for business-related activities. (That's why there's an abacus emoji) You'll find it in the top right part of the sheet.
The Calculator will automatically spit out your business-use percentage in the shaded green box.
If you're already solid on the concepts behind the business-use percentage — or if you just want to learn how to use this worksheet — then that's all you really need to know. Feel free to skip to the next section.
Otherwise, keep reading for more information on your business-use percentage, including what it means for "direct" and "indirect" home office expenses.
When it comes to the home office deduction, your “business-use percentage” is just the portion of your place taken up by your home office.
For example, pretend your apartment is 800 square feet, and your workstation is 80 square feet. That would make your business-use percentage 10%.
Your workstation is just the part of the house or apartment where you do your freelance or independent contracting work.
It doesn't need to be an entire room
We use the term "workstation" interchangeably with "home office" because it doesn't have to be a dedicated office room. A desk, rolling chair, and chair mat in your bedroom can absolutely be your workstation.
It has to be used regularly and exclusively for work
Whatever area you adopt as your workstation, it just has to be used on a regular basis and follow the "exclusive-use rule” — meaning, you only ever use it for work purposes. Your kitchen table, for instance, wouldn’t cut it.
You need your business-use percentage to figure out how much of your home-related purchases you can deduct. To put it another way, you can only deduct the business-use percentage of your home-related expenses.
For direct home office expenses
Let's backtrack a bit. There are actually two types of home office expenses, direct and indirect. Direct expenses are things exclusively used for working from home, like:
These things are only used in the office part of your home. You can't benefit from them when you're just hanging out on your couch or in the kitchen.
These direct expenses have a business-use percentage of 100%, so they're 100% tax-deductible. (This worksheet can handle these deductions for you — more on that later!)
For indirect home office expenses
On the flip side, there are also indirect home office expenses — meaning, all the other housing costs you pay for. These can include your rent, utilities, and any repairs that apply to your whole residence (like patching your roof or fixing your plumbing).
You benefit from these indirect expenses any time you're at home, whether you're in your office or not. That's why you can only deduct a certain percentage of them — specifically, your business-use percentage.
Most of your deductible home expenses will probably fall into this indirect category. That's why knowing your business-use percentage is so important.
Starting from row 14 and onward, you can enter all your home-related expenses.
There's room to enter:
The worksheet will automatically calculate your deductible amount for each purchase in Column F.
If it's a "Direct Expense," 100% of your payment amount will be tax-deductible. If it's an expense in any other category, the sheet will figure out the deductible amount using your business-use percentage.
Dragging down the deductible amount formula
If you have more home office expenses than the examples in the sheet, make sure to drag down the formula in Column F all the way down, to wherever your last expense is.
You'll notice that there's an optional column, Column G, for notes.
You can use this to jot down comments about any of your expenses — say, if your rent was slightly late one month. That said, it's a good idea to use this column for extra details on your direct expenses. If you spent $300 at Ikea, for example, type in "office furniture" so you know what that expense was for.
We've tried to make this worksheet as user-friendly as possible. That said, if you don't want to drag down formulas or manually enter a number every time you pay your rent, there is an even easier way.
You can track all your home office expenses using the Keeper app. Our app scans your bank and credit card statements for home-related costs and automatically records them from you.
It's smart enough to pick up on recurring expenses like your rent payment, whether you're making it through Venmo, a check, or automatic payments through your bank.
The final section of this worksheet is arguably the most important — it tells you how much you can actually deduct from your taxable income thanks to the home office deduction.
We call this the Home Office Deduction Dashboard. It's at the top left of the sheet.
This Dashboard is completely automated: you won't have to enter anything by hand. It'll tell you:
Both these numbers show up automatically, based on what you enter elsewhere in the worksheet. Now you'll know how much you can write off thanks to your home office deduction!
There are actually two methods for calculating your home office deduction.
If you're using this worksheet to track all your home-related purchases, you're probably already set on the actual expenses method. In most cases, this will be your best option in terms of tax savings, but we want to make sure you understand the simplified option as well.
Instead of tracking all your home-related expenses and writing off a portion based on your business-use percentage, the simplified method for home office deductions lets you write off a specific dollar amount for every square foot of our home office.
That amount may change from time to time, but it's currently $5.00 per square foot. The maximum allowed square footage is 300, which means the simplified method caps your home office deduction at $1,500 a year.
Since most self-employed individuals have more than $1,500 in deductible business expenses each year, it's usually better to just track your actual home expenses.
Hopefully, this free worksheet — and the Keeper app — can take the hassle out of expense tracking.
Because you deserve the biggest home office deduction possible.
Jesus Morales-Grace, EA
Jesus Morales is an Enrolled Agent and has 7 years of bookkeeping and tax experience. He enjoys hiking, traveling, and studying tax law.
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