I’ve worked from home for most of my career and it’s been great. I get to spend quality time with my family, run errands mid-day, and avoid dreadful commutes. I also enjoy work from home tax breaks every year.
If you use a part of your home for business purposes, you may be able to deduct expenses for the business use of your home. I strongly recommend this for self-employed persons who work from home.
I have a home office and I save hundreds of dollars every year because I use the home office deduction on my taxes.
The home office deduction
This provides a tax break for taxpayers who use a part of their home for business. The work from home tax deduction is also applicable to renters, apartment owners, condos, and any type of home.
However, there are 3 basic requirements to qualify you for the home office deduction
You must be self-employed
The Tax Cuts and Job Acts of 2017 (TCJA) strictly states that the home office deduction is only available to self-employed workers. So you must first be self-employed to qualify.
Regular and exclusive use
You must use a portion of your home regularly and exclusively for conducting your business. If you don’t have an extra room for your home office you can use a small corner by your living room or bedroom as long as that space is used solely for business purposes.
Your home office must be your principal place of business
Your home office must either be the principal location of your business or the place where you meet up with clients and customers regularly.
What expenses can you deduct?
According to Earnable, here are some examples of the type of costs that apply to the home office deduction.
- Interest on your home mortgage
- Cleaning services
- Pest control
- Internet services
- Property taxes
- Repairs and maintenance
- Homeowners insurance
- Homeowner’s association fees
- Mortgage insurance premium
Some few costs of maintaining your home that don’t apply include-
- Lawn maintenance
- Pool cleaning and maintenance
- Telephone expenses
Calculating the home office business deduction
There are primarily 2 methods for calculating home office deductions.
The regular method
To do this simply add up the total expenses involved in maintaining your home for the year then multiply them by the percentage of your home used for the business.
For example, if your home office measures about 150 square feet and the total area of the house is 1,200 square feet; your business percentage would be 12.5%.
You can use the regular method to deduct 100% of the direct costs of your home office. Direct costs are expenses that directly relate to your home office. For example, installing bookshelves into your home office is a direct cost
Indirect costs are not directly related to your home office but you can still claim a portion of it for the home office deduction.
Simplified square footage method:
The IRS provides a simplified option for claiming the deduction. For this method the prescribed rate is $5 per square foot with a maximum of 300 square feet.
So, for example If your home office measures 150 square feet, then your deduction would be $750 (150 x $5). As described above, the space must still be dedicated to business activities only.
The qualification for the home office deduction with either method changes yearly. So you can qualify for this year and not qualify for the next or vice versa.
If you are eligible, the work from home tax write-offs can be well worth the extra work required to qualify. I will also recommend that you make use of TurboTax as it makes your deductions much easier to deal with.
— Casey Jennings, Marketing Associate