S Corp Home Office Deduction Rules

S Corp home office deductions require specific approaches: Two Methods Available: Actual Expense Method: Calculate business percentage of home (usually by square footage). Deduct business percentage of mortgage interest, utilities, repairs, depreciation. Simplified Method: $5 per square foot up to 300 sq ft maximum ($1,500 annual deduction). S Corp Specific Rules: Reimbursement Approach: S Corp reimburses owner for home office expenses under accountable plan. Owner deducts nothing personally; S Corp deducts reimbursement. Rental Approach: S Corp pays reasonable rent to owner for office space. Owner reports rental income, deducts related expenses. Direct Payment: S Corp pays utilities/expenses directly if clearly business-related. Requirements: Exclusive and regular use for business purposes. Principal place of business OR used regularly for client meetings. Documentation: Photos of office space, records of business use, expense receipts, written agreement if using rental approach. Best Practice: Reimbursement method often cleanest approach. Ensures business deduction at entity level while avoiding personal income to owner.