Working from home comes with various benefits, such as no commute and a casual dress code. It can also offer potentially valuable tax deductions for people who qualify.
Here are a few tips for claiming work-from-home tax deductions.
Claiming the home office deduction
The home office deduction allows certain people who use part of their home for work to deduct certain housing expenses. There are two methods for claiming the deduction:
- Simplified method. This method allows you to take a deduction of $5 per square foot used for work, up to a maximum of 300 square feet.
- Regular method. This method requires you to track all the costs of maintaining your home and multiply them by the percentage of your square footage used for business. For example, if your home takes up 8% of your home's square footage, you can deduct 8% of your qualifying expenses. Examples of qualifying expenses include mortgage interest or rent payments, property taxes, utilities, homeowners' or renters' insurance premiums, repairs and maintenance, pest control, and security.
Using the regular method, you can also deduct 100% of any direct home office expense. These are costs that apply only to your office area. For example, if you install bookshelves in your home office, you can deduct 100% of the cost rather than a percentage.
Only self-employed people can claim the home office deduction
Before the Tax Cuts and Jobs Act (TCJA), salaried or hourly employees who worked from a home office could claim the home office deduction. However, the TCJA ended the deduction for employees working from a home office for the convenience of their employer.
Currently, only self-employed workers and some business owners can take this deduction.
Not all work-from-home setups qualify
Your workspace must meet two basic requirements to qualify for the home office deduction:
- Regular and exclusive use. You must use the space exclusively for conducting business. In other words, if you work at your dining room table and eat meals there, you can't take the home office deduction for your dining room. However, a dedicated room isn't required—a desk in the corner of the room counts if that space is used regularly and exclusively for work.
- Principal place of business. Your home office must be your principal place of business. Your home office doesn't qualify if you typically work from another location and only occasionally work from home. However, you are allowed to occasionally work away from your home office, such as at a client's office or coworking space.
There are exceptions to these rules for in-home daycares, separate structures on your property, and storing business inventory. You can read more about those exceptions in IRS Publication 587.
Other work-from-home tax deductions
If you're a salaried or hourly employee working from home, you generally can't deduct any unreimbursed job expenses. For example, if you upgraded your internet, purchased a printer, or bought a more comfortable desk chair, you can't deduct those costs from your tax return. Your best bet is to ask your employer to reimburse you.
However, the IRS makes an exception for five types of employees. The following employees can deduct at least some of their out-of-pocket work expenses.
- Performing artists. Actors, dancers, musicians, and other performing artists may deduct performing-arts-related expenses, such as professional photos, website costs, travel, and more.
- National Guard and Reservists. Taxpayers can deduct out-of-pocket work expenses if they travel more than 100 miles from home to perform services as a National Guard or reserve member.
- State and local government officials. Fee-based state and local government officials can deduct work-related expenses, including home office and travel costs.
- People with physical or mental disabilities. Taxpayers with physical or mental impairments can deduct work-from-home costs, including attendant care and other expenses that allow them to work.
- Kindergarten through grade 12 educators. K-12 teachers, counselors, principals, and aides can deduct up to $300 of out-of-pocket work expenses. These expenses might include professional development courses, books, supplies, equipment, and other classroom materials.
You can learn more about how and where these employees deduct work-from-home expenses in the IRS Instructions for Form 1040 and Instructions for Form 2106.
Deducting your work-from-home expenses can get complicated. If you need help figuring out what you can deduct and how to claim these tax breaks, be sure to reach out to a qualified tax professional.
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