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You can claim a tax deduction for expenses related to your home office if you are self-employed and work from home, even if only part-time. Unfortunately, if you’ve been working from home due to the COVID-19 pandemic, you won’t be eligible for the fantastic home office deduction you’ve read about.

Due to the epidemic, I began working from home. Is it possible to deduct my home office expenses?

Regrettably, the answer to that question is a resounding no. Traditional employees (those who work for an employer full-time or part-time) are not eligible for a tax deduction for expenses linked to their home office. You’re probably aware that the home office deduction is only accessible to self-employed workers.

Throughout the epidemic, many companies have offered home office stipends or financial assistance to their employees while requiring that they work from home. If your firm has not offered to cover any of your additional expenses, we recommend contacting your HR department or direct manager to inquire about the potential of obtaining help. It’s never a bad idea to inquire!

While working from home has its advantages, the increased electricity bills and the necessity to purchase equipment in order to work successfully can put a strain on your finances. We recommend that you speak with your employer about how they might be able to assist offset some of those additional expenditures, especially if you won’t be returning to work anytime soon.

Can I claim unreimbursed employee expenditures for my home office supplies?

Traditional employees’ work expenses, such as rent, electricity, and other costs, were also affected by changes to the home office deduction in 2018.

Prior to the Tax Cuts and Jobs Act (TCJA) taking effect in 2018, you could deduct unreimbursed employment expenditures on Schedule A of your federal income tax return if they exceeded 2{ed128cd433bbc4517f50fb13ce34d1a6ed6ee0bfab1b878224d80b604512994b} of your adjusted gross income (AGI).

Regrettably, this is no longer the case.

You can no longer deduct your out-of-pocket expenses if you work from home as an employee, even if it is for the convenience of your employer. Unreimbursed employee expenses were no longer deductible under the new tax rules.

You can still claim the home office deduction for qualified costs if you’re self-employed, whether you utilize the actual expenses approach or the simplified method. Your company income and, as a result, your gross income are reduced by the deduction. qualifications

to take advantage of the home office deduction In the vast majority of cases,

If you utilize a piece of your house purely for your business and nothing else, you may be eligible for the home office deduction.

A home office is defined as a place where you work from home.

The area must be utilized regularly and exclusively for your self-employed firm to be termed a home office. The office space must be your primary business location or a separate structure used in conjunction with your company.

There’s no need to separate your home office from the rest of the house with a wall or other barrier. For instance, if you have a desk in the corner of your living room where you do business, you can still claim the deduction as long as you don’t use that portion of your home for personal purposes.

Exceptions to the deduction for a home office

There are exceptions to the home office guidelines from time to time. In-home daycare organizations, for example, are exempt from the exclusive use test. To be eligible for such an exception, you must meet two conditions:

You run a childcare center for children, seniors over 65, and adults who are physically or mentally unable of caring for themselves.
State law requires you to obtain a license, certification, registration, or approval as a daycare facility (unless you’ve been granted an exception).

Another exception is for those who use their houses to keep business inventory or product samples, according to the IRS. You must meet all of the following requirements to qualify for this exception and claim the home office deduction:

As a firm, you offer your items wholesale or retail.
For commercial purposes, you maintain the inventory or samples in your house.
Your home is your sole place of business.
You use the storage space on a regular basis for commercial purposes.
You make use of a storage place that is clearly marked as such. Business expenses at the office

Direct and indirect expenses for a home office business are separated.

Direct expenses, such as furniture, equipment, and supplies, are charges that only relate to your home office. Direct expenses are completely deductible on your tax return.

Indirect expenses include things like utilities, rent, insurance, security system fees, and other charges that aren’t directly related to your home company. Divide the total square footage of your home by the number of square feet in your home office to find the deductible percentage of these charges.

Indirect expenses include things like utilities, rent, mortgage insurance, real estate taxes, security system fees, and other charges that aren’t directly related to your home company. To claim these deductions, fill out Schedule A. Divide the total square footage of your home by the number of square feet in your home office to find the deductible percentage of these charges.

a straightforward technique of

You can utilize the simple technique instead of crunching the {ed128cd433bbc4517f50fb13ce34d1a6ed6ee0bfab1b878224d80b604512994b} numbers for your business expenses if crunching the percentage numbers sounds like too much work. The Internal Revenue Service (IRS) provides a simplified technique for calculating your home office deduction.

You deduct a flat rate per square foot with the simplified approach, which for the tax year 2021 is $5 per square foot for up to 300 square feet. You have the option of using the simplified technique or keeping track of actual spending every year.

The streamlined method is still only available to self-employed people who work from home (such as independent contractors or freelancers). We previously discussed how typical employees who work from home are no longer able to deduct these costs on their tax returns.

Audits and the deduction for a home office

Using the home office deduction does not enhance your chances of being audited much. However, as always, it’s a good idea to keep meticulous records of your income and expenses, down to the last penny spent or earned.

While claiming this deduction does not increase the chances of an audit, it is always important to keep good records. Keep all of your receipts in a safe place so you may use them as documentation in the event of an audit.


This text is provided for educational purposes only and is not intended to provide legal or financial advice.

Camari Ellis

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