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Surprise! You May Not Qualify for a Home Office Deduction

By Maurie Backman - Mar 13, 2020 at 9:10AM

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Read this before you attempt to claim your home office on your taxes.

These days, a large number of Americans do their jobs from home, and as such, have dedicated offices for that purpose. If you have such a setup, you may be wondering whether you're eligible to claim a home office deduction on your taxes. But to qualify for that deduction, you need to meet a few key criteria that many workers may struggle with this filing season.

The rules of claiming a home office

To be eligible for a home office, you must fulfill the following criteria:

  1. Have a dedicated space in your home used solely for work purposes. In other words, if you have a playroom filled with your kids' toys and you use the corner desk to set up your laptop, that doesn't count. The space you consider your home office can't be used for anything other than job-related activities.
  2. Have a home office that's your principal place of business. If you rent office space in town but work from home once or twice a week in your den, you can't claim that space as a home office -- even if you use it for work purposes only.
  3. Be self-employed. This is a big change from previous tax years, where you could otherwise qualify for the home office deduction as long as you met the first two criteria. But following the Tax Cuts and Jobs Act, which was passed in late 2017, tax-filers can no longer claim miscellaneous itemized deductions, which a home office falls under for non-self-employed workers. Even if you're a salaried employee who works exclusively from home, the deduction is off the table.
Man sitting on couch typing on laptop.

Image source: Getty Images

How to claim your office

Unfortunately, a large number of people who work from home won't be able to snag a tax break in the process. But if you are eligible for a home office deduction, here's how to claim it:

  1. Use the simplified method. Take the number of square feet in your office and claim $5 for each one, up to a total of $1,500.
  2. Deduct direct and indirect home office expenses. Direct expenses are those incurred because of the work you do. Buying a printer, and paper to go with it, counts as a direct expense, which you can deduct in full. Indirect expenses are those needed to make your home in habitable and functional -- things like water, electricity, and heat. They don't pertain to your work only, so you can only claim indirect expenses proportionately to the amount of space your home office takes up. For example, if you rack up $10,000 in indirect expenses, and your office takes up one-tenth of your home, you get a $1,000 deduction, plus whatever your direct expenses amount to.

The more deductions you're able to take on your taxes, the less money you'll owe the IRS. But before you start counting the savings you'll reap from the home office deduction, make sure you're actually allowed to take it. The last thing you want to do is claim this or any other deduction you're not eligible for and wind up with a headache on your hands when the IRS comes asking questions.

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