Self-employed with home office - how do I correctly deduct homeowners insurance and property taxes?

I'm trying to get my 2024 taxes together and I've run into a weird issue. I work from home as a freelance graphic designer and have a dedicated office space in my house (about 1 bedroom's worth of space). When I connected my bank accounts to my tax software, it automatically categorized ALL of my property taxes and homeowners insurance as home office expenses. This seems wrong to me? I mean, I only use one room out of my 3-bedroom house for work purposes. Shouldn't I be calculating some kind of percentage based on square footage or something? The software is showing the full $3,800 in property taxes and $1,450 in homeowners insurance as business expenses. That feels like I'm claiming way more than I should be. I don't want to mess this up and trigger an audit or something stupid. Do I need to manually adjust these amounts? And if so, how do I calculate what portion is actually deductible for my home office? The IRS instructions are confusing me.

0 coins

20 comments

Amara Nnamani

•8M

You're absolutely right to question this! Your tax software is incorrectly categorizing 100% of those expenses as business deductions, which is definitely not correct for a home office that's just one room in your house. For home office deductions, you need to calculate the percentage of your home that's used exclusively for business. The simplest way is to divide the square footage of your office by the total square footage of your home. For example, if your office is 150 sq ft and your home is 1,500 sq ft, your business percentage would be 10%. Then you apply that percentage to your homeowners insurance and property taxes. Using the 10% example, you'd deduct $380 of property taxes (10% of $3,800) and $145 of homeowners insurance (10% of $1,450) as business expenses on your Schedule C. The remaining amounts would still be potentially deductible on Schedule A if you itemize deductions rather than take the standard deduction. You'll need to manually adjust these in your tax software to avoid claiming too much and risking an audit.

0 coins

Amara Nnamani

•8M

For documentation, it's always a good idea to have measurements of both your office space and total home square footage written down somewhere. Photos can be helpful but aren't strictly required. The most important thing is that the space is used exclusively for business - meaning no personal activities happen there. The IRS is more concerned with the exclusive use requirement than the exact square footage calculation, though having those measurements documented is definitely good practice.

0 coins

NebulaNinja

•8M

I went through this exact same headache last year! My tax software did the same thing - categorized everything as business expenses. What saved me was using taxr.ai to analyze my deductions. I uploaded my tax documents at https://taxr.ai and it flagged my home office deductions as potentially problematic and explained the correct way to calculate them. The site walked me through exactly how to properly calculate my home office percentage and showed me which forms needed adjustment. It even highlighted where my software had made similar categorization mistakes with other expenses that could have gotten me in trouble with the IRS.

0 coins

NebulaNinja

•8M

It's actually really accurate - they use the same tax rule engines that professional preparers use. I was impressed by how it caught things my regular tax software missed, especially with these partial deduction situations. Regarding privacy, they're very security-focused with bank-level encryption. They don't store your documents long-term, and you can delete everything after analysis. It saved me way more than what my accountant used to charge, and it caught several other deductions my software missed besides just the home office issue.

0 coins

Dylan Mitchell

•8M

I tried taxr.ai after seeing it mentioned here, and wow - it literally saved me from making a $4,200 mistake on my taxes! It flagged that my tax software had incorrectly categorized my entire mortgage interest as a business expense (similar to your property tax issue). The tool showed me exactly how to calculate the correct business percentage based on my office size. It also caught that I was missing legitimate deductions for utilities and internet that should have been partially allocated to my home office. The analysis took about 10 minutes, and the interface was super straightforward to use. Definitely recommend checking it out before filing if you have a home office - it cleared up all my confusion around what percentage of expenses I could claim.

0 coins

Sofia Morales

•8M

If you end up having issues with the IRS about your home office deductions (which happens a lot), don't waste days trying to call them directly. I used Claimyr to get through to an actual IRS agent in less than 20 minutes after spending THREE DAYS trying on my own. They have this system at https://claimyr.com that gets you past the hold times - you can see how it works at https://youtu.be/_kiP6q8DX5c I had a similar home office deduction question last year that my software calculated wrong, and the IRS sent me a letter questioning my deductions. The agent I spoke with was actually super helpful and walked me through exactly how to fix it. Saved me a ton of stress and potentially avoided penalties.

0 coins

Sofia Morales

•8M

It's completely legitimate - they use a callback system. Basically, they use an automated system that waits on hold for you, and when an IRS agent picks up, they connect the call to your phone. You still talk directly to the IRS agent. Yes, you absolutely still verify your identity with the IRS directly - Claimyr just gets you past the hold time. They never ask for any personal tax information. They're just solving the "being on hold forever" problem, not handling any of your personal tax details. I was skeptical too but it actually worked perfectly.

0 coins

Ava Garcia

•8M

I was totally wrong about Claimyr. After seeing it mentioned here, I decided to try it because I was desperate to talk to someone about my home office audit notice. I had been trying to call the IRS for over a week with no luck. Using their service, I got a call back with an actual IRS agent on the line in about 15 minutes. The agent reviewed my home office situation and confirmed I had calculated my deduction percentage correctly (I used the square footage method). She even gave me additional documentation tips to support my deduction if I get a formal audit. The whole process was completely legit - I spoke directly with the IRS, verified my identity with them, and got my questions answered. Wish I hadn't wasted a week trying to call them directly!

0 coins

StarSailor}

•8M

I've been doing this wrong for years! Just learned that if you use the "regular method" for home office (not the simplified method), you should calculate: 1. Business percentage (office sq ft ÷ total home sq ft) 2. Apply that % to: insurance, property tax, mortgage interest, utilities, repairs 3. Report direct office expenses at 100% (like paint just for that room) 4. Depreciation is calculated separately using that same percentage Don't do what I did and just guess at amounts! IRS loves to audit home offices.

0 coins

StarSailor}

•8M

For simplified vs. regular method, it really depends on your situation. Simplified method gives you $5 per square foot of office space (up to 300 sq ft max, so $1,500 max deduction). It's super easy but might give you a smaller deduction. Regular method is more work but often yields a bigger deduction, especially if you have a larger home office or live in an area with high property taxes/costs. I'd recommend calculating both ways and going with whichever gives you the bigger deduction. Just remember, if you use the regular method, you'll need to track more expenses and calculate depreciation.

0 coins

Zainab Ismail

•8M

Internet and phone bills are handled differently! You can deduct the business portion, but it's not necessarily calculated using the same square footage formula. Instead, you estimate what percentage is business use vs. personal use. For a dedicated business phone line, you can deduct 100%. For a shared phone, you'd estimate (like 60% business, 40% personal). Same for internet - if you're using it heavily for business but also for Netflix, you might claim 70-80% as business expense. Just be prepared to justify your percentages if asked.

0 coins

Nia Thompson

•4M

One thing I learned the hard way - make sure you're using the space "exclusively" for business if you want to claim the home office deduction. The IRS is really strict about this. If you sometimes use that room to watch TV, store personal stuff, or let guests sleep there, you can't claim it as a business expense. I got audited a few years back because I claimed my spare bedroom as an office, but I also had a pullout couch in there for guests. The auditor disallowed the entire deduction because it wasn't exclusively business use. Now I have a dedicated office space that's only used for work - no exceptions. Also, keep detailed records of your square footage measurements and take photos showing the business use. If you get audited, they'll want proof that the space is truly dedicated to business activities only.

0 coins

Romeo Barrett

•2M

This is such an important point that not enough people understand! I made a similar mistake when I first started working from home. I was using my "office" to fold laundry and store holiday decorations, thinking it wouldn't matter since I used it for work 90% of the time. The IRS doesn't care about percentages when it comes to exclusive use - it's all or nothing. Even occasional personal use can disqualify the entire deduction. It's actually better to claim a smaller space that's truly exclusive than a larger space that has any personal use. Thanks for sharing your audit experience - it's a good reminder that the IRS does check these things and the exclusive use test is real!

0 coins