With a sizeable portion of the workforce continuing to work remotely, many taxpayers may be wondering whether they qualify for a home office deduction.
Employees are not eligible for the deduction, even those who work 100% remotely. Only self-employed taxpayers and those classified as independent contractors may take advantage of the home office deduction.
To qualify, the taxpayer must regularly use a portion of their home exclusively for their trade or business.
“Regular use” requires use of a specific area in the home for business on a consistent basis. Incidental or occasional business use is not “regular use.” For example, a contractor who converts a small room in her home into an office that she routinely uses for the administrative or management activities of the business (such as making calls to customers, ordering supplies, and bookkeeping) may qualify for the deduction.
Additionally, the home office must be used exclusively for the taxpayer’s trade or business. The contractor discussed above would not qualify for the home office deduction if her children also used the office for homework or studying. There are two exceptions to the exclusive use requirement: taxpayers who store inventory or product samples, or who use part of their home as a daycare facility.
Taxpayers who qualify for the home office deduction may either allocate their actual expenses or elect a simplified method to calculate the deduction. Under the simplified method, the taxpayer may deduct $5 per square foot for up to 300 square feet of space used exclusively for business purposes (a maximum deduction of $1,500).
Contact your accounting professional with any questions about a home office deduction. We can also help get you in touch with a CPA if you need help.