Claiming Your Home Office? Here’s What You Should Know.
Working from home has grown in popularity over the past ten years or so, but in 2020 the number skyrocketed. When the coronavirus hit, many companies switched to a strictly virtual work model and asked all employees to continue working from their homes.
This switch was easier for some than others. To work from home, a person will need all of the tools, supplies, and technology used every day at the office. This added expense was tough for many individuals during an already challenging time. Buying a desk, chair, printer, high-speed internet service, and other necessary items can get expensive, but there may be a tax deduction in store for qualifying individuals.
If you have been working from home in 2020, you may qualify for the home office tax deduction. Here’s everything you need to know about claiming your home office.
What Is The Home Office Deduction?
It is a federal income tax deduction that allows those who qualify to deduct specific work related expenses. Examples of necessary costs that might be deductible include part of your rent (if you do not own your home), mortgage interest, property taxes, utilities, security systems, and more.
Can You Claim The Deduction If You Work For Someone Else?
Unfortunately, those who are employed by someone other than themselves do not qualify for the deduction. Typically an employer will provide all necessary work from home items that may be needed, and so the employee will most likely not have to use their own money to purchase these items. However, if they do need to purchase them independently, the employer will usually reimburse for all expenses.
Who Qualifies For The Home Office Deduction?
If an individual uses their home office “regularly and exclusively to conduct business”, then they can most likely claim a deduction for that room. However, if a person does freelance work and spends most of their time on the road and only a small amount of time at their home office, they may not qualify. To be considered eligible, there must be business work conducted regularly in the house.
The home office must also be the principal place of business. The IRS decides whether a home office is the principal place of business by analyzing how much time is spent there and what business activities are conducted. There are circumstances, though, in which a home office can be deducted even if a person works part time outside of their home. These details, as well as which method of deduction (regular or simplified), can be complicated – be sure to do your research or reach out to a tax professional for advice.
If you still have questions about the home office tax deduction, or if you would like to learn more about how Taurus CPA Solutions can help your business, please contact us today.
Business owners and managers have enough on their plates without having to worry about tax preparation and planning. It’s an essential part of managing your business’s finances and requires time and attention to detail that you just don’t have or better spent on other things.