What is the Home Office Tax Deduction?
If you work from home, you may qualify for a home office tax deduction. It’s a bit complicated though, so make sure to get advice from your accountant or a qualified tax professional, which I am not. But I do know a little bit about the home office tax deduction, and I don’t mind sharing:
- The home office tax deduction can only be used for space that is used exclusively for work. I didn’t say “almost exclusively”. I said “exclusively”. So if your kitchen island is your office by day and your dinner table at night, that doesn’t count. If your coffee table is your workspace by day and your kids’ chosen homework spot in the evening, that doesn’t count either. If you use your guest room as an office all week long, but someone sleeps in there once in a while, that doesn’t count either. Exclusively means exclusively — you must have a space that is solely used for your business, not for other personal work, bills, or to rest, etc.
- What if you have a space that’s used exclusively for work – no personal use at all – but it’s not a separate room? Don’t despair. You may still qualify for the home office tax deduction. You need to measure out that area. Yep, get a tape measure and come up with a square footage of the space that you use exclusively for work. You may even consider separating the space using shelving or a divider to make the demarcation clear.
- If you work for a company and work from home as a convenience for yourself, you don’t qualify for a home office deduction. However, if your company doesn’t keep an office in your area, and if it’s meant as a convenience for the company, you may qualify. You’ll probably need something in writing from your employer.
- There’s a simple method you can use to claim your home office deduction. Under the simple method, each square foot you use for work is worth a $5 deduction. If you’ve got 50 square feet of exclusive office space, that’s a $250 deduction. You can claim up to a maximum of $1500 this way.
- If your expenses are higher and you need to claim more than $1500, there’s a complicated method also. It involves tracking every single expense associated with your home (taxes, utilities, insurance, etc.), and frankly, I don’t understand it very well. If you want to learn if this method works for you, call your accountant.
Before trying to claim a home office deduction on your tax return, make doubly sure you qualify. Discuss it with your tax professional and get their advice. Remember, I am not a tax attorney and I am not providing tax advice, just sharing what I know!