Are you wondering if working from home during the COVID-19 pandemic can lead to some tax breaks for your small business? Are you worried about potentially triggering an audit by claiming the home office deduction?
Generally speaking, to qualify for the home office deduction, you must meet one of these criteria:
- Exclusive and regular use: You must use a portion of your house, apartment, condominium, mobile home, boat or similar structure for your business on a regular basis. This also includes structures on your property, such as an unattached studio, barn, greenhouse or garage. It doesn’t include any part of a taxpayer’s property used exclusively as a hotel, motel, inn, or similar business.
- Principal place of business: Your home office must be either the principal location of your business or a place where you regularly meet with customers or clients. Some exceptions to this rule include day care and storage facilities.
If you are an employee working remotely, you may not qualify for the home office tax deduction. Prior to the Tax Cuts and Job Act, employees could deduct unreimbursed employee business expenses, including the home office deduction. But for tax years 2018 through 2025, these deductions have been eliminated. For example, If you are an employee of another company but also have your own part-time business based in your home, you can pass the home office test even if you spend much more time at the office where you work as an employee.
If you are self-employed, you may be able to claim the home office deduction. The IRS has made it easier for people who work out of their homes to qualify for these deductions. For example, Say you set aside a room in your home for a full-time business and you work in it ten hours a day, seven days a week. If you let your children use the office to do their homework, you violate the exclusive-use requirement and forfeit the chance for home office deductions.
At IRSAdviser.com, our team of FEE-ONLY CPAs can help you determine whether you qualify for the home office tax deduction and how to claim it in the most optimal way. They can also help you calculate the home office deduction on IRS Form 8829 and help.
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