With the rise of COVID-19, many more Americans are not just working from home, but also starting their own endeavors.
Self-employed? Side hustler? Solo-entrepreneur? Freelancer?
If you’re any of those, you may qualify for the Home Office Tax Deduction. This advantage may be available to you regardless if you’re a homeowner or renter.
What expenses can you deduct?
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Home office space.
Keep in mind, your kitchen table or living room couch does NOT qualify. Your dedicated home office space needs to be just that- a space dedicated to work, even if there are no physical walls or barriers surrounding it.
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You may deduct $5 per square foot of your dedicated workspace up to 300 square feet or $1,500 maximum deduction
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If your home office costs more than $1,500, you will want to use the actual-expense method. You may deduct the cost of any NEW furniture used for your home office including, but not limited to: a computer or laptop, printer, desk, office chair, desk lamp and/or other décor, a business phone line.
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Indirect expenses.
Expenses like your mortgage, HOA fees, property taxes and utilities are considered indirect expenses.
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You may only deduct the percentage of your indirect expenses that correlates to how much of your home your designated workspace takes up. For example, if your dedicated work space is 100 square feet and you live in a 1,000 square foot apartment, you may only deduct 10% of that cost.
As always, it’s best to double check with a CPA or tax professional to make sure you are compliant in taking advantage of this tax deduction and if you even qualify.
THE BOTTOM LINE:
With the rise of COVID-19, many more Americans are not just working from home, but also starting their own endeavors for extra income. Entrepreneurs, solopreneurs and freelancers can receive tax breaks by taking advantage of the Home Office Tax Deduction. Be sure to track your expenses, and keep your business expenses separate from your personal expenses.
