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Are You Eligible for the IRS Home Office Deduction?

One of the major social side effects of the COVID19 pandemic is a wave of businesses and workers transitioning to a work-from-home model. You may be deliberating whether working from a home office will yield any tax breaks under the IRS home office deduction. If you are self-employed and are working from home, you may be eligible for IRS home office deduction, which can help reduce your federal income tax bill.

While you may qualify for taking a tax break for your office expenses, you need to follow IRS home office deduction rules. Here is what you need to know about eligibility for IRS home office deductions.

Do You Qualify for the IRS Home Office Tax Deduction?

Not everyone with a home office will be eligible for a deduction for a home office. Here are the criteria you need to meet to qualify for home office deductions.

  • Regular and exclusive use: Generally, to qualify for deduct home office, you must use your home office on a regular basis and exclusively for your business. For instance, you must use a part of your house, apartment, mobile home, condominium, or comparable structure for your business regularly. However, it doesn’t include your property that is exclusively used as a hotel, inn, motel, or similar business.
  • Principal place of business: While your home doesn’t necessarily have to be the only location you meet your customers or clients, it must be your principal place of business – this means you must use your place regularly and exclusively for management or administrative activities such as keeping books and records, setting up appointments, and billing customers according to IRS locations rules.

Who Doesn’t Qualify for Home Office Deduction?

Before the Tax Cuts and Jobs Act (TCJA), the rules for the IRS home office deductions applied to both the employees and self-employed people who had a home office, so, if you are an employee who works at home, you, unfortunately, don’t qualify for the home office tax deduction between January 1, 2018, and December 31, 2025. Likewise, if you are self-employed and uses a portion of your home for business but don’t qualify for IRS home office requirements, you wouldn’t be able to get deductions for home office.

Home Office Expenses IRS

You can deduct direct expenses related to your office, which could include equipment, maintenance, furniture, supplies, and so on. Moreover, you can deduct a portion of your home office expenses. For the part of your home-related expenses, you are required to compare the amount of your home office space with the total space of your home.

How to Determine Your Home Office Tax Deduction

The value of your deduction can be calculated either through a simplified or regular method. If you decide to simplify the process, you are not actually deducting expenses. With the simplified method, the square footage of the property is multiplied by a prescribed rate. You will get a deduction for home office of $5 per sq ft of your office home.

In contrast, the regular method is more difficult. It values your home office IRS by measuring the actual expenditures against the overall residence expenses. You can also deduct taxes, mortgage interest, insurance, repairs, utilities, home insurance, and other expenses.

Article by James Finsweet

James Finsweet is a Head of legal department in LawBrother Ltd. At Lawrina, James contributes his experience in law practice and shares opinions on law regulations and news.

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