Week 5: February 2-8, 2026
DON’T MISS
Tax Season Is Officially Open
The IRS began accepting 2025 individual tax returns on January 27, 2026. Taxpayers who have received all required forms and expect a refund may receive their funds sooner by filing earlier in the season.
Before filing, confirm you have received all necessary documentation, including:
All issued 1099 forms
Prior-year tax return for reference
Records of estimated tax payments
Business income and expense documentation
Retirement contribution confirmations
Filing with incomplete information often results in amended returns and delayed processing. If you are still waiting on forms or final numbers, there is no disadvantage to waiting. The filing deadline remains April 15.
Source: IRS IR-2026-05; IRS.gov, “When to File”
THE SOLOPRENEUR’S BRIEF
Home Office Deduction Rules That Still Matter
Most missed home office deductions are not caused by audits or complex calculations. They fail due to the IRS “exclusive use” requirement.
The home office deduction remains one of the most misunderstood areas of small business taxation. Many eligible taxpayers avoid it due to outdated audit concerns or uncertainty about the rules. While enforcement standards have evolved, the deduction remains available when requirements are met and properly documented.
The home office deduction is available only to self-employed individuals and independent contractors. W-2 employees cannot claim this deduction on their federal return, even if they work from home full-time.
Taxpayers may choose between two methods.
Simplified Method:
One calculation based solely on office size, with no link to actual housing costs.
Flat rate - Deduction based on square footage at $5 per square foot
Annual cap - Maximum deduction of $1,500 regardless of actual expenses
Minimal recordkeeping - No need to track utilities, insurance, or repairs
No depreciation tracking - Does not affect future home sale calculations
Actual Expense Method:
A proportional deduction based on real housing expenses and documented business use.
Expense allocation - Housing costs multiplied by business use percentage
Recordkeeping required - Utilities, insurance, mortgage interest, repairs
Higher potential deduction - Often larger for higher cost homes or larger offices
Regardless of the method used, the space must meet strict qualification standards. To qualify, the home office must be used regularly and exclusively for business and must function as the taxpayer’s principal place of business for administrative or management activities.
Exclusive use means the space cannot serve any personal purpose. If the room also functions as a guest bedroom, family space, or storage area for non-business items, it generally does not qualify.
In Plain English: “Exclusive” means 100% business, 100% of the time. A desk in your guest bedroom doesn’t qualify because guests sleep there. A dedicated room with a door that’s only used for work does.
Further, when the home qualifies as the principal place of business, travel from the home to other business locations is generally treated as business mileage rather than commuting.
Keep in mind, the deduction is limited by business income. The home office deduction cannot exceed net business income after other deductions. Under the actual expense method, unused amounts may carry forward to future years. Under the simplified method, unused amounts are lost.
The home office deduction remains legitimate, well-defined, and commonly claimed. Its value depends on meeting the qualification rules, maintaining clear records, and selecting the method that reflects actual business use.
Source: IRS Publication 587; Rev. Proc. 2013-13
LESSONS LEARNED
Common Home Office Mistakes That Reduce Legitimate Deductions
Mistake #1: Not Claiming It at All
Many solopreneurs skip the home office deduction because they’ve heard it “triggers audits.” This fear is outdated. The IRS simplified the rules in 2013, and with millions now working from home, the deduction is mainstream.
If you qualify, claim it.
Mistake #2: Failing Exclusive Use
The space must be used ONLY for business. Common disqualifiers:
Guest bedroom that doubles as your office
A desk where kids do homework
A TV in the office “for background noise”
If there’s ANY personal use, the space doesn’t qualify.
Mistake #3: Defaulting to Simplified
The simplified method ($5/sq ft, max $1,500) is easy, but it’s not always best. Run both calculations before deciding. The actual expense method may often result in a larger allowable deduction.
Mistake #4: Forgetting the Mileage Bonus
When your home qualifies as your principal place of business, every business trip from home becomes deductible mileage. This secondary benefit can exceed the home office deduction itself.
Source: IRS Publication 587
BRIEF RECAP
Key takeaway: The home office deduction remains a legitimate tax benefit for self-employed taxpayers who meet the IRS exclusive use and principal place of business requirements. Careful evaluation of both calculation methods helps ensure the deduction reflects actual business use and income limitations.
In last week’s issue: Missing a tax deadline does not automatically mean you are out of options. Filing late is usually better than not filing at all. Keep in mind, retirement contributions remain one of the few ways to reduce last year’s tax bill even after the year has ended.
Next week: Retirement accounts are the most effective tax shelter available to self-employed taxpayers. Choosing the right plan and understanding contribution limits and deadlines can reduce both income tax and self-employment tax while building long-term retirement savings.
Disclaimer: This publication is provided for general informational and educational purposes only and does not constitute personalized tax, legal, or accounting advice. Tax laws are complex and subject to change, and their application depends on individual circumstances. Readers should consult qualified professionals regarding their specific situations.
Circular 230 Disclosure: To ensure compliance with U.S. Treasury Department regulations, we inform you that any U.S. federal tax discussion contained in this publication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or for promoting, marketing, or recommending any transaction or matter addressed herein.