Home Office Deduction
If you use part of your home as an office for your business, a portion of your expenses may be deductible if they meet the requirements for the home office tax deduction.
Commonly referred to as home office tax deduction and work from home tax deduction.
Do I Qualify for the Home Office Deduction?
To qualify for a home office deduction, you must use part of your home in one or more of the following ways:
• Exclusively and regularly as your principal place of business
• Exclusively and regularly to meet with clients, patients or customers in the normal course of business
• On a regular basis for certain storage use
• As a daycare facility
2022 Home Office Deduction Details
“Exclusively” means the area can only be used for your trade or business. It does not have to be separated by any kind of permanent partition. “Regularly” means you use the space more often than occasionally or incidentally.
To determine what qualifies as a “principal place of business” for the work from home tax deduction, consider the time spent and relative importance of the activities performed at each place where you conduct business. A home office qualifies as a principal place of business if:
1. It is used exclusively and regularly for the administrative or management activities of your trade or business.
2. There is no other fixed location where you conduct a substantial portion of those activities.
A separate structure not attached to your home may qualify for the work from home tax deduction if it is used in connection with your trade or business.
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• A portion of operations costs, such as utilities, homeowners insurance, homeowners association fees, security, cleaning, pest control, maintenance, mortgage interest and property taxes, can be deducted from business income. The deductible portion is calculated by dividing the square footage of your office by the total square footage of your home.
• As a result, you may also benefit from reduced taxable income and self-employment tax.
• Additional record keeping may be required.
• If you claim depreciation on the home office space, it will be subject to recapture rules when you sell your home.
Assumptions When Taking the Home Office Deduction
• Unless provided specifically by the client or available on a prior year tax return, indirect expenses are not provided.
• Direct allowable expenses (including furniture, artwork, etc.) will be taken as a deduction directly on the Schedule C.
• Accountable Plan
Requirements to Claim the Home Office Deduction
• The home office is the principal place of business for a Schedule C company.
• If the business is not a Schedule C, these numbers can be used as part of an accountable plan.
Business Entities That Can Claim the Home Office Deduction
• Schedule C
• Schedule E
• Schedule F
• Farm Rental
• S Corporation
• C Corporation
The material discussed on this page is meant for general illustration and/or informational purposes only and is not to be construed as investment, tax, or legal advice. You must exercise your own independent professional judgment, recognizing that advice should not be based on unreasonable factual or legal assumptions or unreasonably rely upon representations of the client or others. Further, any advice you provide in connection with tax return preparation must comply in full with the requirements of IRS Circular 230.