Home Office Decor Deductions

Is your home office décor a home office deduction?  It sure could be.  If you’re wading through the tax laws to help you figure out how much you’re going to owe Uncle Sam, and exactly what can you deduct if you have the luxury of working from your home, the following will help you with unravel the guidelines for this deduction.  Specifically, does your home office mean a deduction that can lower your taxes?

First, you need to determine if you have a qualifying home office.  Is your couch next to the television considered your office, or will the IRS disagree.  Here’s the Internal Revenue Service’s definition for a deductible home office:   

  • You use it exclusively and regularly for administrative or management activities of your trade or business.
  • You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.

So, if you work from your house occasionally in the evenings, but also have office space where you do your primary business, you may not qualify for this deduction, or it may be a reduced deduction.

If your home workspace does qualify for a home office deduction, you will next have to quantify it.  Specifically, you are going to be asked to produce a percentage of the home that is used for your business.  Here’s how:

  • Take the square footage of the area you use for your home office.  Say you have a separate office downstairs just for your business that is a 12x15 room, that ‘s 180 square feet. 
  • Divide that number by your home’s square footage – let’s say in this instance you have a 1800  square foot home.
  • You will come up with a percentage on which to determine your deduction.  In this case, 10%

So, if you are using 10 percent of your home for your home office, you can potentially deduct 10 percent of your mortgage interest, utility costs and certain other expenses through your home office expense.  Unfortunately, you cannot deduct the actual cost of your mortgage - wouldn’t that be nice!

What About your Décor for your Home Office? 

Repairs and furniture generally qualify as a business expense.  But if you’re making permanent improvements to the home that add to the value of the house, they’re not deductible.  Here’s the example the IRS gives for permanent improvements:

“You buy an older home and fix up two rooms as a beauty salon. You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. You cannot deduct any portion of it as a repair expense.” (IRS Publication 587)

The IRS website, www.irs.gov, offers several searchable topics on this subject, so it’s always a good place to research this more in depth, or you can consult a tax professional to see if your home office qualifies for this deduction.