Let’s go ahead and accept that for the remainder of the year 2020 you will not be returning to work in your office, but instead will continue working from home. For some of you, that would be wonderful since you get to avoid rush hour traffic, save on transportation costs, and even get to sleep in a bit later. For others of you this is daunting as it seems like you are working harder and longer hours. So much for the fantasy of working from home and having free time to shop and take care of personal business during this pandemic. Since you have and more than likely will continue working from home for the remainder of the year, are there any tax breaks available?
If you are an employee unfortunately the new tax law eliminated the provision that allowed workers to deduct unreimbursed business expenses including home office deductions. Particularly if the expense exceeded 2% of an employee’s adjusted gross income. The law also eliminated the convenience of employee tests which could have been applied as a result of COVID -19. Therefore as an employee, working from home has no tax benefits.
If you are self employed, an independent contractor, or have a side hustle, you are eligible to claim the home office deduction. To qualify to deduct expenses for business use of your home you must use part of your home:
- Exclusively and regularly as your principal place of business;
Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business.
Those two requirements represent some of the basic requirements in order to be eligible for the home office tax deduction.
When figuring the amount you can deduct for the business use of your home use either your actual expenses or a simplified method. Whichever method you use keeping records is critical to your success with the Internal Revenue Service.