ORLANDO, Fla. (Ivanhoe Newswire) – The coronavirus pandemic has forced millions of working Americans out of their offices and into their homes. If you’ve been working from home, you may be wondering if you qualify for a home office tax deduction. We’ll explain what you need to know.
Forty-two percent of the workforce is now working where they live. Besides no commute, another perk? A possible tax break! If you’re an employee at a company, meaning you receive a W2, you are ineligible. Only those who are self-employed can apply.
There are two main qualifications: you must use a portion of your home exclusively and regularly for your work, and your home must be your principal place of business. However, it may be a red flag for auditors.
“One of the expenses you can deduct for a home office, if you own a house, is depreciation on the house,” said Gary Kane, CPA, of Kane & Associates.
If you do decide to make a claim, the IRS offers a simplified option. The 2020 rate is $5 per square foot with a maximum of 300 square feet. So, if your office is 200 square feet that would be $1,000.
The traditional method involves figuring out the percentage of your home that’s devoted to business use you can deduct a portion of direct expenses.
Certain businesses, such as daycares, may have different qualifications for a home office deduction. These are complicated tax issues so be sure to check with your own tax advisor.
Sources: https://news.stanford.edu/2020/06/29/snapshot-new-working-home-economy/ https://www.irs.gov/newsroom/heres-what-taxpayers-need-to-know-about-the-home-office-deduction https://turbotax.intuit.com/tax-tips/small-business-taxes/the-home-office-deduction/L1RZyYxzv https://www.nerdwallet.com/blog/taxes/home-office-tax-deductions-small-business/
Contributor(s) to this news report include: Julie Marks, Producer; Bob Walko, Videographer and Editor. To receive a free weekly email on Smart Living from Ivanhoe, sign up at: http://www.ivanhoe.com/ftk