Whether you are self-employed or an employee, if you regularly and exclusively use a portion of your home for business, you may be able to deduct expenses for the business use of your home.

Expenses for the business use of your home may include mortgage interest, insurance, utilities, repairs, and depreciation. The home office deduction is available for homeowners and renters, and applies to all types of homes, from apartments to mobile homes.

The two basic requirements for your home to qualify for the home office deduction are that:

If an employee, the business use of your home must be for the convenience of your employer, but not by renting any part of your home to your employer.

Expenses that exclusively benefit your business are considered direct home office expenses. (for example, repairing or repainting a space that is now your office).

Direct expenses are fully deductible.

Indirect home office expenses are expenses that benefit the entire home (for example, patching the roof) and are proportionately deductible based upon the percentage of business use of the home.

Expenses that benefit only the personal portion of the home are not deductible at all.

To calculate your home office deduction you have to use Form 8829, if you are self-employed, or Form 2106 if you are an employee.

If you are self-employed, you have to transfer the deduction to Schedule C.

If you are an employee, you transfer the deduction to line 21 of Schedule A.

You have to keep records of utilities, mortgage interest, real estate taxes, rent, insurance, trash removal and security service payments that you made during the year; include gas and electricity bills, repair and maintenance bills, etc.

Of course, you have to take the square footage of your office and divide it by the square footage of your entire home to obtain the percentage of the costs you can claim.

The new option will allow qualifying taxpayers to claim $5 per square foot of the office, up to 300 square feet. The deduction will be capped at $1,500 per year and the form for claiming it will be simplified.

Homeowners using the new option cannot depreciate the portion of their home used in a trade or business, but they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.

Business expenses unrelated to home, such as advertising, supplies and so on, are still fully deductible.

The new option is estimated to save small businesses about 1.6 million hours annually because of the reduction in record keeping and paperwork. The complicated and time consuming existing method presumably determined many small business owners to skip over the home office deduction altogether.

Specialists also say that, because of the simplified form and process, the new deduction option is less likely to trigger an audit.

In choosing what method is better suited to your particular situation, advice from a tax professional is always the best solution.