Eligible US taxpayers can use the home office deduction to deduct certain home expenses from their annual tax returns.
Following the COVID-19 pandemic, the number of persons working from home increased dramatically in 2020. Although COVID-19 is no longer a new emergency, many employees regularly work from home.
Home Office Deductions
This deduction is mostly for self-employed professionals who work from home rather than in the employer’s office. To be qualified, you must utilize a section of your house exclusively for business operations on a regular basis.
Because many workers have been compelled to adopt social distancing and work from home, these are two simple prerequisites to achieve. In some situations, switching from an employee to a contractor may be desirable in order to take advantage of this deduction and unlock additional tax benefits available to contractors.
Their primary place of business must be their residence. It should be emphasized that a home office deduction is also allowed for costs associated with a separate structure that is not an integral part of the home, but only if that structure is utilized for business on a regular and exclusive basis.
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Simplified And Regular Method
The “Simplified Method” is the simplest way to compute your home office tax deduction. The IRS enables taxpayers to deduct $5 per square foot (up to 300 square feet) of house utilized in carrying out your business.
If your work-from-home area is larger than 300 square feet, you can use the “Regular Method,” which allows taxpayers to deduct the portion of expenses that are allocable to your home office depending on square footage. ]
For example, if your work from home space is 400 square feet and your whole home is 2,000 square feet, you can deduct 20% (400/2,000) of your home-related expenses (internet fees, insurance, taxes, mortgage interest, and so on). Form 8829 would be used to report the deduction.
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