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Home Office Tax Deduction for Landlords

home office tax deduction

Individual landlords don’t always realize their rental property income is basically its own small business. In order to manage the business, it has to operate somewhere and that is usually at a desk or in an entire room in your home. As long as it’s exclusively used for your rental activities like paying bills, screening tenants, etc., you can claim a portion of your overall home’s expenses (utilities, homeowners insurance, homeowners association fees, security, and general repairs and maintenance) as a deduction.

Your home office portion can be calculated two ways, see which one gives you the largest deduction.

Method 1: Divide the dedicated area’s square footage by the entire living area square footage of the house. If you use 150 sq ft used out of a 2,000 sq ft house, then 150 ÷ 2,000 = 12.5%

Method 2: As of 2017, multiply the dedicated area’s square footage by $5 per square foot (cannot exceed a maximum of 300 square feet or $1,500). This amount is subject to change in future tax years, but the calculation should remain a simple one.

In addition, you can also deduct a portion of the mortgage interest and property insurance or rent (if you don’t own your home).

Figuring the right deductions can be complicated but online filing sites such as TurboTax and HR Block will easily guide you through the process.