May 18, 2020
As a result of the coronavirus pandemic, many more people than usual are working from home. Some of those new to work-from-home may be hoping to take advantage of home office tax deductions on their 2020 tax returns. A recent article from Forbes offers a reminder about who is eligible for this tax deduction, what the qualifications are, and how to calculate the deductible amount.
Though the deduction used to be available for all taxpayers, a change ushered in by the 2018 Tax Cuts and Jobs Act (TCJA) added new limits to who can claim this deduction. For the tax years 2018 to 2025, workers who are employees can no longer take the deduction. The TCJA limits the deduction for home office expenses to self-employed taxpayers.
Here is a quick reminder of the qualifications for home office deductions, for those who are still eligible to take the deduction. The part of your home that you set aside for your business must be:
- “Exclusively and regularly for your trade or business” and
- Either your principal business location, somewhere that you meet with clients, and/or a separate structure used for your business.
There are two acceptable methods for calculating the deductible amount for your home office:
- Calculate the amount of space used for your business, compare it to the total space of your home to find the percentage of your home-related expenses that are deductible, or
- Claim the standard deduction, which is $5 per square foot, up to 300 square feet.
If you area self-employed taxpayer whose home office meets the qualifications for the home office deduction, please do not hesitate to reach out to a Lohman Company tax advisor to help you achieve tax savings via this deduction.