Many home-based business owners and some home-based workers may now use a simplified option to figure their deductions for the business use of their homes. This new optional deduction is based on $5 a square foot for up to 300 square feet and is capped out at $1,500 per year.
Homeowners using the new option cannot depreciate the portion of their home used in a trade or business. However, allowable mortgage interest, real estate taxes and casualty losses on the home can be claimed as itemized deductions on Schedule A (Form 1040).
Allocation of these deductions between business and personal use is not required, as it is under the regular method.