Tax Deductions for Your Home Office

Tax Deductions for Your Home Office

Can Working from Home Turn into a Tax Deduction?

With more people working remotely, many have turned their homes into an office. This has left U.S. workers left with questions as to whether they qualify for a federal home office tax deduction.

Let’s look at what you need to know about a home office tax deduction.

Workers Eligible for a Tax Deduction

Come tax time each year, many workers who receive a W-2 tax form from their employer shouldn’t count on their home office being considered a tax write-off. Those that can qualify for a federal tax deduction are self-employed individuals and independent contractors. For them to be eligible, they must regularly be using a part of their home exclusively for business such as a spare bedroom, garage, basement, or library.

If an individual is self-employed for a short period during the year, they may qualify for the federal home office tax deduction. To determine their deduction, they’ll calculate their expenses from the months that they worked in their home office.

What States Allow the Home Office Tax Deduction?

Certain states permit employees to take a federal tax deduction on their home office expenses. They include:

  • Alabama
  • Arkansas
  • California
  • Hawaii
  • Minnesota
  • New York
  • Pennsylvania

These seven states will provide a tax deduction on their respective tax returns for unreimbursed employee expenses.

Eligible Costs

Now that we’ve determined who is eligible, it’s time to define and calculate what expenses can be deducted. To maximize your deduction, you should calculate your home office expenses under two methods: the simplified option and the standard option.

Under the simplified option, you can deduct $5 per square foot and up to 300 square feet of your space. With the standard option, you can deduct your actual expenses such as repairs and maintenance to the home office, a portion of your property taxes, and a portion of your mortgage interest, utilities, or rent. This calculation is dependent on the area that is utilized as a home office. Whichever option yields a higher expense calculation is the one you should report.

Need Help Determining if You’re Eligible for a Tax Deduction?

Tobin & Collins is prepared to assist you with your tax liabilities and help you prepare a tax return. Schedule a consultation with us at (201)-487-7744 or by filling out a contact form.

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