Raymond uses one bedroom of his two bedroom Washington, D.C., apartment as the principal office of his software development business. The home office is 100 square feet. The total square footage of his four-room apartment is 556 square feet. His monthly rent (which includes utilities) is $1,800/month.
Using the regular square foot method, he can deduct 18 percent of his rent (100/556). With this method, his deduction is $324/month or $3,888 per year.
Using the regular percent method, he can deduct 25 percent of his rent (1/4). So, his monthly deduction would be $450/month or $5,400/year.
Either of these methods would give Raymond a substantially higher deduction than the $1,500 he could claim using the simplified method.