As an entrepreneur, there is a good chance that you work from home at least part of the time. You might even have a home office area dedicated to work so that you can work anytime — without going into a formal office. If you work from home, you might be eligible for the home office tax deduction. If you think you might want to take advantage of this tax break, here is what you need to know:

You Have Two Options for Taking the Home Office Tax Deduction

First of all, understand that you have two options when it comes to taking the home office tax deduction. The first method is the “traditional” way that entrepreneurs have used for years. You figure out how much space your home office occupies as a percentage of the available space in your home. If your home has 2,000 square feet, and your home office space is 200 square feet, you figure your tax deduction based on that 10%. (If more of your home is used, percentage-wise, you can take a bigger chunk. But you need to be careful about what you consider a home office.)

So if you pay $1,000 per month in rent or mortgage, then you can deduct 10% of that for your home office. That amounts to $100. However, you can also deduct the portion of your utilities that your home office takes up. If you pay $200 in utilities each month, you can deduct another $20 per month (or $240 per year), since that is 10%. You can also deduct a portion of your homeowners insurance. This can be one way to deduct your home office costs when you have a larger space.

There is an easier way to take the home office tax deduction as well. A couple years ago, a new option for claiming this deduction was introduced. Now, if you want, you can claim a flat rate of $5 per square foot, up to $1,500. So if your home office space is 200 square feet, you could claim $1,000. Depending on the size of your office, and how much documentation you want to deal with, you can choose the method that works best for you.

You Can Only Claim Space Used Exclusively for Business

When you do claim the home office tax deduction, it’s important that you only claim space that you are actually using for business purposes. We have a room in my home called “the office.” However, we also use that room as a project space for my son, and a music practice area. As a result, I can’t actually claim the entire room for a deduction. Instead, I claim the area around my desk. This is an area that is about five feet by six feet, or 30 square feet. My home office tax deduction isn’t huge as a result, but it does exist.

Before you decide to claim your home office, make sure that you aren’t claiming space that isn’t used for your business. If you are audited, you need to be able to properly justify your home office space.

Claiming Other Home Business Tax Deductions

There are other home business tax deductions that you might be able to claim as well. You can claim a percentage of your home Internet usage if you run your business from home. About 85% of the Internet used in my home is for business purposes, so I can claim that as a business expense. I’ve also been able to claim office supplies, furniture and equipment. As always, though, you need to keep your receipts for documentation purposes.

A Note About Business Use When You Work for Someone Else

Even if you use don’t run your own business, you might still be able to claim the home office tax deduction. If you are working from home at the request of your employer, you can deduct your related expenses. However, you can’t choose this option if you are working from home more as a convenience for you than for your employer.

Working from home can be a great relief to many people, and it provides a certain amount of flexibility for your schedule and your working conditions. If you work from home, consider whether or not it makes sense to claim the home office tax deduction.