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Understanding the Home Office Deduction for Small Business Owners Small business owners who work from home may be eligible for significant tax savings through the home office deduction. Here's what you need to know: To qualify, your home office must be used exclusively and regularly for business purposes. This space must also be your principal place of business or where you meet clients/customers. There are two methods to calculate the deduction: 1. Simplified Method: Deduct $5 per square foot of office space, up to 300 square feet (maximum $1,500). 2. Regular Method: Deduct a percentage of actual expenses like mortgage interest, utilities, and repairs based on the portion of your home used for business. Key points to remember: - W-2 employees working from home cannot claim this deduction. - Keep detailed records of all business expenses and home office usage. - The deduction cannot exceed your business income. - Consider consulting a tax professional to maximize your deduction while staying compliant.