You must have self-employment income
The home-office tax deduction used to benefit anyone who maintained a dedicated space in their home used solely and exclusively for business. The Tax Cuts and Jobs Act significantly changed this tax break. Starting in 2018, employees working from home no longer qualified for a home-office tax deduction.
You don’t have to be a full-time entrepreneur
If you work part-time on your business from home or also have a day job, you still qualify to claim the home-office tax deduction. You don’t have to have a full-time business to claim legitimate home-office expenses.
You must satisfy usage requirements
If you’re self-employed, you must use a home office as the primary place you conduct business to qualify for the deduction. You must also have an identifiable space where you work, such as a guest room, nook or a detached studio that can be measured. But Your home office doesn’t have to be the only place you work or meet customers to qualify for the home-office tax deduction. For instance, you might also occasionally work at a coffee shop or a co-working space, or meet clients in their homes.
Not all expenses are fully deductible
Direct expenses for your office area, such as flooring, furniture, window treatments or an additional phone line, are 100% deductible. However, you can’t deduct improvements outside of your office or home, such as landscaping, installing a pool or remodeling your kitchen.
Indirect office expenses apply to your entire home, such as rent, mortgage interest, property taxes, insurance, cleaning and utilities. You’d have these costs even if you didn’t have a home office. They’re partially deductible based on your office’s size and the calculation method you choose. Keep reading to learn more.
You choose the best way to calculate your deduction
You can choose one of the following calculation methods for your home office in any tax year:
The itemized deduction requires you to calculate your office’s percentage of your home space and apply it to your expenses. For example, if your office is 10% of your home, you can attribute 10% of qualifying expenses to business use.
The simplified deduction allows you to claim $5 per square foot of your office area, up to a maximum of 300 square feet. This eliminates having to keep detailed records, but won’t give you the largest deduction when your office exceeds 300 square feet or you live in a high rent area.
My Fiscal Office LLC
77 Bleecker Street
New York, NY 10012