Everyone who works from home may not be eligible for the home office deduction. Find out whether your home office qualifies for a tax deduction here.
What you’ll discover:
What is the definition of a home office deduction?
Are there any tax breaks available to workers for expenditures incurred when working from home?
If I’m self-employed or an independent contractor, what are the qualifying criteria for the home office deduction on my 2022 taxes?
Be careful you claim the home office tax deduction.
The pandemic’s forced closure of many workplaces left firms with no alternative but to adapt to an already expanding trend toward remote work arrangements. Although many workplaces have reopened, other businesses have opted to close their doors for permanently.
Whether your work-from-home arrangement is temporary or permanent, you’ve certainly got concerns regarding how the home office will affect your taxes in 2022. In this post, we’ll go through the home office deduction, changes in tax legislation, and how it can relate to your case.
Table of Contents
What is the definition of a home office deduction?
You may be allowed to deduct expenditures linked to the use of your home for remote work, whether you’re a homeowner or a renter, but only if you’re an independent contractor or otherwise self-employed. Rent or mortgage (depending on time and space allocated to work) and other costs spent for business purposes are eligible for the federal home office deduction.
Choose from the standard or simplified techniques.
For the 2022 tax year, there are two techniques for determining your deductible. You have the option of computing your deduction using the conventional approach or the “simplified” method. You’ll be able to establish whether approach is more advantageous if you compute your deduction using both ways before filing your tax return.
The main distinction is that the conventional approach requires you to calculate the proportion of your home’s square footage allocated to business usage, as well as additional costs such as utilities, maintenance, insurance, and depreciation. In general, the simplified approach allows for a standard deduction of $5 per square foot of residence used solely for business purposes (up to 300 square feet), but you may still claim itemized deductions on the Schedule A form, such as mortgage interest and real estate taxes.
For the conventional technique, use Form 8829.
The conventional technique is designed to be used with IRS Form 8829 (Expenses for Business Use of Your House). Form 8829 is not required for the simpler version.
There are two columns on Form 8829 for some kinds of costs: direct expenses and indirect expenses. The first are expenditures that you would not have spent if it weren’t for the home office (for example, soundproofing), while the latter are expenses that you would have incurred anyway, such as your overall rent. Direct expenditures may be deducted in their whole, but indirect expenses are calculated depending on the proportion of your house that is used entirely for business.
Are there any tax breaks available to workers for expenditures incurred when working from home?
Sadly, the home office deduction is no longer available to workers. Prior to the 2018 tax year, workers may deduct home office costs if they met the “convenience of employer” criteria. However, the Tax Cuts and Jobs Act (TCJA), enacted in late 2017, repealed the employee home office deduction. Hence, even if you’re unable to work at an office due to a necessary shutdown or additional measures taken by your business during the COVID-19 issue, you can’t use the home office deduction any more.
Other unreimbursed employment-related expenditures, such as professional business licensing fees, work-related materials, and travel expenses, were also removed by the Tax Cuts and Jobs Act.
If I’m self-employed or an independent contractor, what are the qualifying criteria for the home office deduction on my 2022 taxes?
Anybody who works remotely as an independent contractor or is otherwise self-employed is eligible for the home office deduction (also known as Business Usage of Your Home). This excludes profit-seeking actions that are not part of a trade or company. For example, you may not be able to claim the home office deduction if you routinely trade equities online.
There are a few fundamental factors to consider when deciding whether you may deduct work-from-home costs on your tax return. The following conditions must be satisfied in order to qualify for either method of computing the deduction:
Use on a regular and exclusive basis. The area of your house utilized for remote work cannot be used for personal reasons. A separate room or even a piece of a room, for example, might qualify, but not the kitchen table.
The main location of business. The home office for which you are claiming a deduction must be your principal place of business, and you cannot have another location where you conduct a significant amount of business.
These standards are subject to a few exceptions. You may claim the following home office deduction:
If you own a childcare center, regardless of whether the facility is also utilized for personal purposes.
For any part of your house that is frequently utilized to keep inventory or product samples, even if it is not your primary company location.
Be careful you claim the home office tax deduction.
If you’ve been working from home for a long, you’re probably aware of the extra costs that might arise as a consequence. It might be tough to determine the deductions and credits you are eligible for and how to claim them on your tax return
