You can deduct office supplies you use as part of your business. Try both options to see which leads to a larger deduction. Quick tip: While the simplified option is easier, it caps at $1,500. You calculate the deduction by completing Form 8829 to itemize these expenses, which makes keeping receipts very important, says Richmond. If you opt for the regular method, there are many types of expenses you can deduct, including physical objects such as furniture and appliances as well as utilities, insurance,maintenance and repairs. Regular method: This method uses the actual expenses you incur. While it's a relatively easy way to account for such expenses, keep in mind that the 300 square-foot limit results in a maximum deduction of $1,500, says Ben Richmond, chartered accountant and US country manager (US) at accounting-software provider Xero. Simplified method: This method uses a standard deduction of $5 per square foot of home used for business, up to a maximum of 300 square feet. There are two methods of deducting home office expenses: The home office deduction allows you to deduct any portion of your home that you use regularly and exclusively for work. Here are some of the most common deductions that can help you reduce your taxable income and maximize your profits. Understanding the basics of what expenses you can deduct is important whether you decide to file a return on your own or hire an advisor to help guide you through it. Having to report your own business income and expenses adds another layer of complication. By clicking ‘Sign up’, you agree to receive marketing emails from InsiderĪs well as other partner offers and accept ourįrom long hours to variable income, self-employment can be a tough way to make a living.
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