Definition
Self-employed people may deduct part of their home costs if they use part of the home regularly and only for business, or $5 per square foot up to 300 square feet.
What it means
If you are self-employed and use part of your home regularly and exclusively for your business, and it is your principal place of business or a place where you meet clients, you may be able to deduct the business share of home costs such as rent, mortgage interest, utilities, insurance and repairs. The regular method uses actual expenses and the percentage of the home used for business, figured on Form 8829. The simplified option instead allows $5 per square foot of the business area, up to 300 square feet, so at most $1,500 a year, with no need to track home expenses. A spare bedroom that is also used by guests does not meet the exclusive-use test. The deduction is claimed on Schedule C.
Example
A writer who uses a 150-square-foot room only as an office can deduct $750 with the simplified option ($5 x 150).
Illustrative numbers only. Your situation will differ.