Tax Tips: Home Office Deduction

Working from home? Your at-home office can save you money this tax season! Keep reading to see what qualifies–and what doesn’t–for home office deductions. Here’s a few tax tips.

Are Tax Deductions Good?

Self-employed taxpayers, independent contractors, and those working in the gig economy can claim tax deductions. By writing off certain expenses, you may owe less in taxes. Your claimed expenses must be for business use.

How to Keep Track of Tax Write-Offs 

First, know what qualifies for tax deductions. Each year, it is vital to keep track of all business transactions to claim them during tax time.

It is easiest to keep an electronic folder with all receipts. A spreadsheet may also help you stay organized with spending amounts. Consider hiring a professional accountant to plan and evaluate your business transactions. This structure will minimize the legitimate amount of tax you pay.

To figure out your home office deduction, the IRS issued a simplified version. Check out the home office deduction calculation to add to your bookkeeping.

Do Employees Qualify for Home Office Deduction?

Because of COVID-19, many employees switched to working from home. Some employers provided their employees with WFH equipment. Still, many employees had to buy new items for their home office themselves. They also had to make extra space in their home for work.

Unfortunately, because of the Tax Cuts and Jobs Act, employees cannot use the home office deduction from 2018 through 2025. This includes employees who receive paychecks or W-2’s exclusively from an employer even if they are working from home. This deduction only includes self-employed taxpayers, independent contractors, and those working in the gig economy.

According to the IRS,

“If you use part of your home exclusively and regularly for conducting business, you may be able to deduct expenses such as mortgage interest, insurance, utilities, repairs, and depreciation for that area. You need to figure out the percentage of your home devoted to your business activities, utilities, repairs, and depreciation.”

Do Home Office Deductions Trigger Audits?

It is not likely for the IRS to audit your home office. You should not have to worry if you work from home and use the space regularly and exclusively for business.

If you are still unsure, learn more about home office deductions from the IRS Business Use of Your Home guide. You may also contact PL Consulting, a team of professional accountants and bookkeepers.

Outsource Your Tax Preparation to PL Consulting

PL Consulting is your go-to resource for tax preparation services. We serve the Baltimore, Maryland area and beyond. We are experienced in tax preparation, including filing individual, small business, partnership, and estate returns. We ensure you consider all your legal deductions to realize your full tax benefit.

Our comprehensive interview techniques and computerized return preparation process assure that your return is complete, correct, and presented to you promptly.

Questions? Call us at 410.764.3731 or contact us on our website to schedule an appointment with one of our professionals.