Document the space itself
Measure the room or area used for business and the total square footage of the home. Write both numbers on a page and add a date. Take a photo showing the workspace and a simple sketch with measurements. If you move or rearrange, repeat the process.
The general idea behind the rules is that the space is used regularly and in a particular way for the business. Your preparer can explain the current requirements, which also differ for employees and the self-employed.
Record how you use it
Keep a short note on what happens in the space: client calls, administrative work, inventory storage, or something else. A calendar showing regular working hours there supports the claim. Note whether any family or personal activity takes place in the same area, as that may matter.
If you rent out a room or host others, tell your preparer. Changes in use during the year need to be reflected.
Know the two calculation approaches
The tax rules generally allow a simplified method based on area and an actual-expense method based on a share of real home costs. Your preparer chooses between them with you. The simplified method needs mainly the square footage. The actual-expense method needs year-long records of costs.
Check the current limits and rules on the IRS website or with your preparer rather than relying on remembered figures.
Keep the home cost documents
If actual expenses may be used, keep mortgage interest statements or rent payments, property tax bills, homeowners or renters insurance, utility bills, and repair receipts. Separate repairs to the office itself from repairs to the whole house and from items for areas not used for business.
Create a folder or a dedicated section in your accounting file for these. Many owners do not record home costs in the business books at all, because the calculation happens on the return. Ask your preparer which approach they want.
Common mistakes
The most common errors are guessing square footage, claiming a space that is also the guest bedroom, and recording the entire utility bill as a business expense. Another is forgetting to update the numbers after a move, when the old figures keep getting reused.
Ask your preparer for a one-page worksheet. Fill it in once per year with the totals and attach the supporting documents. That single sheet is the most useful record you can produce.
Annual routine for the home office file
Each January, confirm the measurements still match the space, take a fresh photo, and note any change in how the room is used. Gather the home cost documents into one folder and write the year on the cover page. Give the folder to your preparer with the rest of your records.
If you worked from home only part of the year because you changed locations, write the dates. Partial-year use is easier to handle when the dates are documented and a mess when they are not.
Common questions
Do I need to record home office costs in my books?
It depends on your preparer's process. Often the calculation is made on the return from a worksheet, and the business books do not include personal housing costs.
Does working from a kitchen table count?
Rules usually look for specific use of the space. Ask a tax professional how they apply to your setup.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.