Home Office Deductions for Bloggers
Bloggers who make an income blogging are often trying to do so in order to work at home. What does that mean? You might have a home office. If you are treating your blog as a business, that means you get to take some additional tax deductions.
(Not sure if you are a business or a hobby? This will help you decide—> Business or Hobby Blog?)
One of those deductions to keep in mind when you are considering your business expenses is your home office. Here are the basics you need to know about home office deductions for bloggers.
Home Office Deductions for Bloggers
Small business owners can claim a home office deduction if they meet the requirements. This isn’t limited to bloggers. But as bloggers are a home based business, this for sure needs to be considered when calculating your tax bill.
(Want help getting organized so tax prep is less painful? There is tax software to help with bookkeeping, but a simple organization system might be all you need to start out—> Organizing Your Blog Bookkeeping)
Does Your Space Qualify
The first thing you need to do is figure out if your work area qualifies as a home office. Sadly you can’t just decide I work from home, therefore my entire home is my office. The IRS is pretty specific about what they will and will not allow.
There are two main tests to see if your workspace can get you deductions on your tax return. These are if your space is used regularly and exclusively.
Do you use this workspace regularly? (I know, I’m defining it with the word, helpful.) The IRS doesn’t give specifics on what this means, so you need to use your own best judgment.
But basically is this space where you do most of your work? It can’t be a place where you work once or twice a year, or even just a time or two a month while you normally work somewhere else. If you are a mom blogger chances are you meet this requirement because, well, you’re at home as it is.
This one is a bit more specific. Your home office needs to be employed for your business only to be reported on your taxes. This is very specific.
It can’t be a guest room you vacate when your in-laws come to visit. It can’t be the playroom because you work in there sitting on the floor while your kiddos play. If the space has an alternate use, it is out.
So if you are like me and blog at the kitchen table, or on the couch, or in bed- you can’t deduct that space as a home office. You would have and utilize that area of your home anyway, so it is not an exclusive business space.
One of my favorite tax tips about home offices is that there is no rule saying a home office has to be a certain size to qualify for a deduction. So if you have a desk that is used solely for your business, you can use the square footage of that desk space to determine your home office deduction.
This means your teens don’t do their homework at the desk and you take over after bedtime, and it can’t be where your spouse catches up on work over the weekend. If only you use it and it is only for your business, it can count.
Principal Place of Business
One last thing piece of this deduction puzzle. our home office needs to be the main place that you work. This kind of goes along with the regularly rule, and if you are a blogger this usually isn’t an issue. Bloggers tend to be sole proprietors that don’t have an office outside the home.
But if you have another location where you actively work your business, you can’t take a home office deduction. Again, bloggers, mom bloggers specifically, tend to work at home. That’s often the point of the job, so this usually isn’t an issue.
How To Calculate Your Home Office Deduction
Once you determine if your workspace qualifies or not you need to decide how to calculate your deduction. There are two methods to determine what your deduction is. These are the Actual Expenses Method and the Simplified Method.
As you can tell from the name the simplified method is a lot easier to calculate. But both methods require you to know how big your home office actually is. So you will need to determine the square footage of your workspace. (Seriously, grab a measuring tape if you need to.)
Calculating Your Home Office Percentage
The Actual Expenses needs the percentage of your home your office space takes up. Take the square footage you measured and divide it by the square footage of your entire home. Then multiply that number by 100. This is the percentage of your home your home office takes up.
Example: Your home is 1000 square feet. Your workspace takes up 50 square feet. (50/1000)x100=5. Your home office is 5% of your home.
Actual Expenses Method
The IRS isn’t super creative in naming, so you can guess that this method requires you to determine the actual amount spent on your home office compared to your home.
In our example, that means 5% of all your expenses need to be calculated. This means you need to calculate 5% of your mortgage (or rent), home insurance, utilities, etc. These are your indirect expenses.
You also need to calculate all your direct expenses.
What’s the difference between indirect and direct expenses? Indirect expenses are things like your utilities, rent, home insurance. Things that are paid for the entire home, but you use a portion because your workspace is there.
Direct expenses are costs made on your actual workspace. So if you have to make a repair or you paint your office, that amount can be deducted.
If you use the Actual Expense Method you will need to use a separate form, Form 8829. There are limits on what you can take as well. To be honest, if this is the route you are taking you need to talk to your tax expert, the one who knows the details of your personal financial situation. (This is really the person to take tax advice from.) There are a lot of factors at play and it is in your best interest to get help with it.
The Simplified Method is just that, simplified. For this one, you need the square footage of your home workspace.
In our example that was 50 square feet. Take that number and multiply it by $5. In our example 50x$5= $250. Your home office deduction is $250. Much easier, huh.
The one caveat here is that it is limited to home offices that are 300 square feet or less. If your workspace is bigger than that you cannot use this method. This deduction can be reported right on your Schedule C.
There are of course limitations to home office deductions. If your business operates at a loss for the year (you lost money, you didn’t make a profit) then you can’t take a home office deduction. If you opt to use the Simplified Method you cannot also deduct things like mortgage or insurance as a business deduction.
Basically, you can’t double dip. You pick one method, and that is what you can deduct.
If you consider your blog to be a business and you have a dedicated home workspace, you need to determine if you qualify for the home office deduction. These are some basic guidelines to help you out. Talk to your tax professional and carefully consider your options before filing.
If your blog is your business, you need to treat it as such and examine all possible tax deductions when filing. That’s just smart business.
If you want to read the official explanation for business use of the home, here is Publication 597 from the IRS website: Publication 587: Business Use of the Home.