Pub 587: A Comprehensive Guide to IRS Publication 587

If you’re a small business owner, freelancer, or remote worker who operates a business from home, IRS Publication 587 (Pub 587) is an essential resource. It provides detailed guidelines on how to calculate and claim deductions for the business use of your home. These deductions can significantly lower your taxable income, making Pub 587 a valuable tool for anyone managing a home office.

In this article, we’ll break down what Pub 587 covers, who qualifies for home office deductions, and how to use it effectively for your tax filings.

What Is Pub 587?

IRS Publication 587 is a document published by the Internal Revenue Service (IRS) that outlines the rules for deducting expenses related to the business use of your home. It provides step-by-step instructions for determining eligible expenses, calculating deductions, and filing the appropriate forms with your tax return.

Who Is Eligible for Home Office Deductions Under Pub 587?

To claim deductions under Pub 587, you must meet certain eligibility criteria:

Exclusive Use

The part of your home used for business must be exclusively dedicated to business activities. For example, a spare room used solely as an office qualifies, but a dining table used for both meals and work does not.

Principal Place of Business

Your home office must be your primary place of business or where you regularly meet with clients or conduct administrative tasks.

Employee Use

If you’re an employee using part of your home for work, you can claim deductions only if the use is for the convenience of your employer and not for personal reasons.

Expenses Covered in Pub 587

Pub 587 categorizes deductible expenses into two types:

Direct Expenses

Costs related specifically to your home office, such as:

Painting the office.
Repairs exclusively for the business space.

Indirect Expenses

Shared costs for the entire home, allocated based on the percentage of your home used for business, such as:

Rent or mortgage interest.
Utilities (electricity, water, heating).
Property taxes.
Homeowner’s insurance.
Depreciation of your home.

How to Calculate Home Office Deductions Using Pub 587

Simplified Method

The simplified option allows you to deduct $5 per square foot of your home office, up to 300 square feet, for a maximum deduction of $1,500.

Regular Method

The regular method involves calculating the percentage of your home used for business and applying that percentage to your total expenses.

For example:

Total home area: 1,500 square feet.
Home office area: 150 square feet.
Business use percentage: (150 ÷ 1,500) = 10%.
If your total indirect expenses are $12,000, your deductible amount is 10% of $12,000 = $1,200.

Forms and Filing Requirements

To claim home office deductions, you’ll need to:

Complete Form 8829 (Expenses for Business Use of Your Home) if you’re using the regular method.
Attach the completed form to your Schedule C (Profit or Loss from Business) when filing your tax return.

Employees claiming deductions must use Form 2106 (Employee Business Expenses).

Common Mistakes to Avoid When Using Pub 587

Failing the Exclusive Use Test

Using your office space for personal activities disqualifies it for deductions.

Miscalculating Business Use Percentage

Ensure accurate measurements of your home and office space to calculate the correct percentage.

Overlooking Indirect Expenses

Don’t forget to include shared costs like utilities and insurance when calculating your deduction.

Not Keeping Records

Maintain detailed records of expenses, receipts, and measurements in case of an audit.

Benefits of Using Pub 587

Tax Savings: Lower your taxable income by deducting eligible home office expenses.
Simplified Compliance: Clear guidelines make it easier to determine and claim deductions.
Flexibility: Choose between the simplified or regular method based on your specific situation.

Conclusion

Pub 587 is an invaluable resource for anyone using their home for business purposes. By understanding the eligibility requirements, deductible expenses, and calculation methods, you can maximize your tax savings and ensure compliance with IRS guidelines. Whether you’re a self-employed professional or an employee, using Pub 587 can make navigating home office deductions much simpler and more efficient.

If you’re preparing for tax season, take advantage of this guide to ensure you claim every deduction you’re entitled to. Don’t leave money on the table—use Pub 587 to your benefit!

FAQs

1. What is IRS Publication 587?

IRS Publication 587 provides guidelines for calculating and claiming deductions for the business use of your home.

2. Who can use Pub 587?

Self-employed individuals, small business owners, freelancers, and certain employees who use part of their home exclusively for business purposes can use Pub 587.

3. What expenses can I deduct under Pub 587?

You can deduct direct expenses for your office space (e.g., painting, repairs) and a portion of indirect expenses (e.g., utilities, rent, insurance) based on the percentage of your home used for business.