working from home tax relief

Claiming the Home Office Tax Deduction When Working Remotely

If you have been working remotely from your home office for some time now and are wondering whether you can claim it as a tax deduction, then this article is just for you! The home office deduction is a tax that allows homeowners and renters to deduct the costs of operating their home office. This includes expenses like rent, utilities, insurance, and more.

Can You Claim Working from Home on Your Taxes?

Gone are the days when taxpayers could benefit from deducting their charitable donations, mortgage interest, as well as local and state taxes. Both home and work-related expenses had to exceed 2 percent of the adjusted gross incomes for tax returns.

Since 2017, deductions that referred to unreimbursed employee expenses have been eliminated, so there are more special write-offs today. For the tax year 2018 and on, it’s not possible to deduct unreimbursed employee costs anymore.

The situation is different now. Maybe you’ve heard of the Tax Cut and Jobs Act. It has changed recently. The IRS now regards remote-work office investments as miscellaneous itemized deductions.

Millions of people have been working from home in the United States. That’s not to say they are all eligible and can all claim home-office deduction and benefit from working from home tax relief. The eligibility depends on numerous parameters.

Who Can Claim the Deduction Today?

Workers receiving a W-2 or paycheck exclusively from their employers can’t qualify for the home-office deductions. So, who can get a tax break? This perk is only for independent contractors, gig workers, and self-employed people. It is important to note that you can claim the deduction even if you are not a real estate owner.

The IRS states that you can deduct the business portion of your home office if you use it exclusively and regularly for your work. As a taxpayer, you are supposed to pay taxes regularly and use this place for storing inventory, conducting your business, and greeting your customers or clients.

Keep in mind that you can also deduct a pro-rata share of certain costs, such as home office expenses, mortgage interest, utilities, income taxes, homeowners insurance, and depreciation. However, you can’t claim a home office deduction if you use it for personal purposes more than the percentage allowed by the IRS.

Can I Write off Working from Home?

When filing 2021 taxes, you might be tempted into thinking that you’ll capitalize on write-offs. Wait a bit. If you’re hired by a company or someone else, your chances of writing off on these taxes and getting a tax break are very slim.

Things are different when it comes to self-employed workers. They can deduct half of the self-employment tax (for Social Security and Medicare in particular) from their net income. The number of unreimbursed employee expenses ​fee-basis government officials, qualified performing artists, and armed forces reservists can put in for is limited.

Are You Eligible? Great! How Do You Claim It?

There are two ways you can claim the home office deduction. You need to work from your home every day (even for just a few hours) or at least once per week for an average of eight hours per day. Also, you can claim this deduction if you have a qualified workspace outside of your house that is used exclusively as a principal place of business.

Exclusive use of the section of a home or room like an unattached garage or a guest bedroom means it’s exclusively used for business. However, if your living room serves as your office but you also use it several times a year (or only once a year) for birthdays, Christmas, Thanksgiving Day, or other holidays, it technically can’t qualify.

How to Calculate Home Office Deduction?

Those who file in 2022 can expect $12,550 for the standard deductions when it comes to single filers. If you are a single or unmarried taxpayer having Head of Household filing status, then you can get $18,800. Married couples who file taxes jointly can expect 25,100.

There are two methods of calculating home-office deduction: the standard (regular) and the simplified option. Let’s see how they work.

Simplified Method

This option involves deducting 5 dollars/square foot of the home office. The maximum amount is $1,500. As for the square footage, it is limited to 300 square feet. It’s not necessary to record all the specific expenses when taking a tax break, providing that the home office can qualify.

While the simplified method can be a bit skimpy, many people opt for it to avoid requirements regarding recordkeeping. Unlike the standard option, it doesn’t involve keeping proof of the expenses related to the home office.

The downside of this method is that the deduction is often lower than it is when going through the costs. Do you still want to choose this way? Then think of enlarging your workspace (if possible) up to the limit for the full deduction.

Standard Method

In this case, the actual expenses are deducted. How much? Well, it depends on the square footage of the workplace.

If your home office makes up 15% of your house, for example, you will be able to claim 15 percent of expenses such as homeowners insurance, utilities, and mortgage interest. Moreover, taxpayers can also be capable of deducting a portion of their home depreciation and property taxes.

Keep detailed records or receipts of all of these costs if you choose this method because you will have to justify what you are claiming. You are also advised to hire an accountant since the calculations can be pretty complicated. The accountant can help in preparing all the necessary taxes as well.

Tax Tips for Remote Employees Working at Home

Lastly, you need to consider some things before claiming this deduction. Don’t rush. Check these tips first.

  • Make sure you meet all the IRS requirements to avoid facing penalties or additional taxes.
  • Keep track of your travel expenses and mileage.
  • Familiarize yourself with the deduction limitations.
  • Save all receipts and keep detailed records.

Final Thoughts

Now that you know how remote working impacts income taxes and how these deductions work, you should not have a hard time claiming the home office deduction. However, you should know whether you are eligible before claiming anything. If you’ve been working remotely but haven’t been able to claim the home office tax deduction, contact an accountant who can help you file your taxes correctly and potentially increase your refund amount.


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