Home Office Deduction—A Complete Guide
Like all other business owners in the USA, solo OnlyFans creators are able to write off a portion of their home that they use to help run their business. This deduction is available to both renters and homeowners. In this blog post, we’ll go over what exactly the requirements are to claim this deduction, how much you’ll be able to save, and why this deduction might not be as straightforward in the adult entertainment industry.
Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or professional advice. Always consult with a qualified tax professional for advice specific to your situation.
Am I Eligible for the Home Office Deduction?
There are two criteria that the IRS looks at to determine your eligibility for the Home Office Deduction:
- Principal Place of Your Business
- Regular and Exclusive Use
The first criteria, “Principal Place of Your Business”, is straightforward. As long as you do the majority of the work for your OnlyFans business from the comfort of your own home, you’ll be able to pass this test. Since most solo creators work from home, this should be an easy requirement.
The second criteria, “Regular and Exclusive Use”, is more challenging for most OnlyFans creators. It means that if you ever film content in your kitchen, your bedroom, or any room that isn’t exclusively dedicated to your business, you are not allowed to claim a deduction on that part of the home. You’ll need a room, or even a portion of a room, dedicated to your business for that part of your home to be eligible for the Home Office Deduction.
To take advantage of the Home Office Deduction, you must set aside a room, or even a portion of a room, for exclusive business use. Most of the time, this means setting up a home office (think of a desk and a chair). Being a Solo OnlyFans creator involves a lot of work editing, posting, sending messages... all of this work can be done from your dedicated home office. This will enable you to take the home office deduction for this portion of your home.
This also means if you have a room dedicated to filming content or livestreaming, like a cam set, you’ll be able to claim the Home Office deduction on that room. If you have a room in your house dedicated to storage for your business, like a prop room or a camera equipment storage room, you’ll be able to add that square footage to your Home Office Deduction as well, even if it’s a shed out in the backyard.
Setting aside some spare rooms on your property for exclusive business use is a great way to give you a better tax break when April 15th comes around.
How Can I Calculate my Deduction?
Once you’ve picked out at least one allowable area of your home eligible for the Home Office Deduction, there are two ways to go about calculating your tax break.
- The Simplified Method
- The Regular Method
For the simplified method, you’ll be able to deduct $5 per square foot of your home office, up to a maximum of 300 square feet. If your home office is 300 square feet or less, your deduction will be equal to your total square footage of your allowable areas multiplied by $5, with a maximum deduction of $1,500. This is a quick and easy way to claim your Home Office Deduction, especially if your expenses are low.
Most high earners will be better off using the regular method: you can read more about the exact calculation on the IRS’s website. It generally involves calculating the percentage of your home that you use for your business on a square footage basis, after which you’ll be able to write off that percentage of the sum of your rent, mortgage, real estate taxes, mortgage interest, utilities, depreciation, insurance, repairs, and home security system costs.
For example, let’s say your home is 2,000 square feet, and your home office is 200 square feet. This means your home office takes up 10% of your home’s total square footage (200 ÷ 2,000 = 0.10, or 10%). If your annual eligible home expenses add up to $20,000, you can deduct $2,000 (10% of $20,000) using the regular method.
In comparison, if you were to use the simplified method for the same 200-square-foot home office, your deduction would be $1,000 (200 sq. ft. × $5). In this case, the regular method yields a larger deduction.
Will claiming the Home Office Deduction increase my risk of IRS audit?
The Home Office Deduction is one of the most scrutinized deductions by the IRS. While claiming the deduction itself doesn’t automatically trigger an audit, it can increase the likelihood of facing additional questions from the IRS, especially if the deduction seems unusually high relative to your income.
As long as you’re following the IRS’s guidelines for allowable areas under the Home Office Deduction, and that you’re keeping proper records of your home and your expenses, you’ll be ready to defend your claims during an audit. This includes photos of your home office, measurements of the space, receipts for related expenses, utility bills, mortgage statements, and a log of hours spent working in the office. In the event of an audit, the IRS may request access to your home office to verify its business use, so be prepared for this possibility.
If you genuinely use a portion of your home exclusively for your OnlyFans business and have the documentation to support it, don’t be afraid to claim the Home Office Deduction. For example, if 20% of your home is dedicated solely to running your business, and you can provide evidence of this, you are well within your rights to take the deduction.
Selling Your Home
If you sell your home after claiming the Home Office Deduction, you might have to pay taxes on the profit you make from the sale of the business portion of your home. This is because the IRS treats the business part of your home differently than the rest of your house. While the primary residence exclusion allows you to exclude up to $250,000 (or $500,000 if married filing jointly) of capital gains from the sale of your main home, this exclusion does not apply to the business portion of your home.
Don’t let the potential tax implications of selling your home deter you from claiming the Home Office Deduction, as your savings over the years from the deduction will almost certainly outweigh the added tax when selling your home. Make sure you keep your annual tax returns organized, so when the time comes when you may want to sell your home, you can easily calculate the total depreciation taken on the business portion of your home over the years. If you ever need help with this, consider reaching out to a tax professional.
Conclusion: Don’t Miss Out on the Home Office Deduction
If you’re like most OnlyFans creators, you not only work from home, but also have at least a dedicated desk or office space where you run your business. If that’s true, you’ll be able to take a tax deduction for a portion of your home-related expenses. Whether it’s a dedicated office, a props closet, or even a backyard shed where you store your gear, every square foot counts. If you know the IRS’s rules for what areas of your home are eligible, don’t be afraid to take the Home Office Deduction to help reduce your taxes.