Can I Take a Home Office Deduction If I WFH?
With more and more people working from home during the COVID-19 pandemic, workers have invested in office supplies, home office furniture, and in some cases, new technology in order to create a proper remote work setting. These expenses have many taxpayers wondering if they’re eligible for the home office deduction on their 2020 tax return.
The short answer is yes — but only if you also use that home office for self-employed business activities. Here’s what you need to know if you’re a remote worker with a home office.
What is the home office deduction?
The home office deduction is for people who use part of their home as their primary workplace. You can deduct certain business expenses for your home office, regardless of whether you rent or own your home.
The catch? This deduction is only available to those who are self-employed. In other words, if you’re a W2 employee who is working remotely, you are not eligible for this deduction unless you have additional self-employment income.
If you meet the self-employment requirement, there are two basic criteria that would qualify your space for a home office deduction. They are:
1. Regular and exclusive use
To qualify for the deduction, you must regularly and exclusively use a space in your home for work. If you have a designated room or area in your home that is solely used for business, you are eligible to take the home office deduction. If you work at the kitchen table or on the couch, this does not qualify as “exclusive space,” as these areas are used for everyday living.
2. Principal place of your business
Your home must be the principal place that you conduct business in. As an example, you can meet with clients at other locations, so long as your home is the principal setting for your business. Freestanding structures that are on your property, such as a studio or garage, that are used as your primary place of business are also eligible.
Employees versus self-employed individuals: Who’s eligible?
Now that the vast majority of people are working from home due to the coronavirus pandemic, you might think you’re entitled to some tax deductions as your home now doubles as your office. Previously if you were a W2 employee who worked from home all or most of the time, you were able to deduct your home office expenses through line 21 of Schedule A. This changed with the Tax Cuts and Jobs Act of 2017 (TCJA).
Once TCJA was passed, W2 employees could no longer deduct home office expenses. Now these deductions only apply to self-employed individuals and independent contractors. During their annual tax filing, these taxpayers can file their home deduction on IRS Form 8829, which is filed under their Schedule C on their 1040.
Get help with your home office deduction from a trusted CPA.
If you’re a self-employed person who works out of their home this year and needs insight as to how you can deduct expenses, contact the experts at Miller and Company. We can connect you with one of our expert CPAs for a free consultation to see what you’re entitled to and how you can qualify for the home office deduction.