We are often questioned about leasing office space, in your own home, to yourself and your home-based business. Is it allowed? Is it tax-deductible? This article, then, is the answer to those questions. We are RDS Real Estate, serving the Greater Fort Worth Metro area and Tarrant, Parker, and Johnson Counties, with affordable industrial space and Fort Worth commercial property for rent. Call us at 817-439-3224 for all questions pertaining to office space for lease.
What qualifies as office space.
An office space is often considered a headquarters of sorts for a business. However, as the world of work is changing, with many adopting hybrid working, the term ‘leasing office space’ is also evolving. Put simply, an office space is a self-contained space that has the sole purpose of accommodating people doing desk-based work. It’s a space for employees to come together and share a workspace. This includes featuring essentials such as WiFi, printing facilities, and other amenities.
The most important distinction is that office space is an area where only business work is conducted, and that stipulation allows for great flexibility when it comes to tax deductions when leasing office space.
Leasing office space in your home instead of traditional office.
Included in that flexible definition is the home-based business and the home-based office, which simply means you “rent” one room in your home which is specifically used as a business office.
What are the legalities?
The IRS requires two basic conditions to claim a deduction for a home office space for lease.
“You must use a portion of your home exclusively for conducting your business regularly. While the IRS does not require you to keep a specific method to prove your home office space to rent, you should keep documents to verify your home office deduction. This may include (but is not limited to) canceled checks, receipts and other records to prove your home office and any expenses paid, such as mortgage interest, cable, utilities and other qualified expenses.
“Also, your home must be your principal place of business. It would qualify as your principal place of business even if you only used your home office exclusively and regularly for administrative tasks only and do not have another location to perform these work duties.”
Let’s look at an example.
Let’s say you are self-employed and had a net income of $9,000 from your business, which is your gross income minus expenses. During 2024, you used your home office, which was 200 square feet and your overall home’s square footage was 1,000. If you incurred the following home expenses of $8,500 for the year, you would be able to deduct 20% of your actual expenses using the actual method and claim an expense deduction of $1,700.
- Mortgage interest: $3,000
- Real estate taxes: $1,500
- Insurance: $2,500
- Utilities: $1,500
As always, we recommend you consult a tax accountant or attorney to make sure all of your I’s are dotted and T’s are crossed.
A final word about RDS Real Estate.
RDS Real Estate is locally owned and operated, and we have what you need, from a warehouse for rent to a shop for rent to a retail space for lease, properties ranging from 320 square feet to 30,000 and more. Call us today and speak to a leasing agent about your needs.