Can I claim my Home Office as an expense this year?

Due to the pandemic and many employees now working from home, one of the most common questions that I have received from taxpayers this past year is whether or not their office in-home expenses will be deductible at tax time.

Unfortunately, there are currently no provisions in the current tax law for employees to deduct their unreimbursed expenses.  The 2018 tax reform act eliminated the itemized deduction for unreimbursed employee expenses, including the office in the home deduction.

However, for those of you who have received self-employment income this year, the office in-home deduction is still available for you!  If you have a portion of your home or other outside structures that you used exclusively and regularly in your business and do not have any other location where you also conduct a substantial amount of the same activities, you will most likely qualify for this deduction.

Your office needs to be a separate room, separately identifiable part of a room, or separate structure – dual use of the same space will not qualify for exclusive use.  There are two methods that can be used in calculating the deduction for an office in the home.  The “regular method” and the simplified method.

The regular method involves direct expenses or an allocation of indirect expenses, such as mortgage interest, real estate taxes, insurance, utilities, repairs, and depreciation or rent.  This usually involves a proration of those expenses based on the square footage of the business use space to the whole home. 

The simplified option is based on the application of a predetermined rate, currently $5.00 per square foot, multiplied by the business use square footage for up to a maximum of 300 square feet.

Please feel free to contact us to address any questions or concerns that you may have!