Last year, many of us were required to turn our living rooms, bedrooms, and other personal spaces into home offices. This raises a potential question in the minds of taxpayers; is it possible to receive deductions for our temporary office headquarters?
When conducting business out of one’s home, taxpayers can deduct certain expenses related exclusively to their trade or business. Initially, all employees could take advantage of the home office deduction. However, in 2017 the Tax Cuts and Jobs Act (TCJA) was signed and altered the guidelines to allow only self-employed taxpayers or shareholders of corporations or partners in partnerships to receive the deduction. Therefore, if you are self-employed, or are a shareholder or a partner, and work from home, you could qualify for the deduction.
In the eyes of the IRS, your home office must meet their “exclusive and regular use” requirements. The space you are using for business must be used exclusively for business. An example is if your space is used for both business and creating artwork, this will make your space ineligible for the deduction. While your home office doesn’t have to be the only place you meet clients or have meetings, it must be the principal place of business. If you have a home office and an additional office elsewhere, your space will be ineligible.
Business Use of Home
Once you determine you qualify for the deduction, the next step is deciding whether to use your actual expenses for the deduction or to utilize the simplified method. Let us explain.
It’s currently tax season. Once you’ve gathered your tax documents, talk to your trusted tax advisor about whether you qualify for this deduction. If you need a trusted advisor, you can make an appointment with us online today.