My Q4 deduction dropped 40% after that one rule changed in January

I file as a sole proprietor in Denver and my 2023 deduction for home office was $3,200. After the SALT cap changes and that new IRS rule about exclusive use, my 2024 Q4 estimated deduction dropped to $1,900. The main reason was I couldn't claim my second bedroom as a dedicated office anymore since we use it for storage sometimes. I didn't even realize the rules tightened until my accountant flagged it. Did anyone else see a similar drop in their home office deduction this year?

3 comments

3 Comments

thomasb418d ago

My brother in law runs a landscaping business out of his garage in Aurora and got hit hard by that exclusive use thing too. He used to claim half his garage for tool storage and a small desk area, but after the rule change the IRS told him it counts as mixed use if he parks his truck in there overnight. His deduction went from about $2,800 to $1,600 just like that. He's been griping about it every time we grab beers at the Sports Column downtown.

lisas786d agoMost Upvoted

Wait, that rule applies to garages too? Ugh, good to know.

charlieh748d ago

My accountant flagged the same thing back in March when I did my first Q4 estimate. I had been writing off about $2,400 a year for my home office in Lakewood, but the new exclusive use rule cut that to maybe $1,500 because I store my kids' old bikes in the corner of the room. The real killer for me was when I tried to claim a partial deduction for the shared space and got a letter saying it didn't qualify at all. What worked was switching to the simplified method at $5 per square foot up to 300 feet, which got me back to $1,500 without all the paperwork and no hassle about mixed use. Just make sure you measure carefully and keep a quick photo for your records in case they ask.