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LearnFAQSelf-Employed & Small Business

Can I deduct a home office if my business shows a loss for the year?

Answer

The home office deduction generally cannot create or increase a business loss; it is limited to your net business income. If your Schedule C is already at a loss, the deduction is disallowed for that year, though under the actual-expense method the unused portion carries forward to offset future business income. The simplified method has the same income cap but no carryover, so the disallowed amount is simply lost. Direct business expenses like advertising and supplies are not subject to this limit and can produce a loss; the restriction is specific to home office costs. Plan around it: in a lean year, the actual method at least preserves the deduction for later.

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