Who Qualifies for Work-From-Home Tax Deductions? (2024)

FAQs

Who Qualifies for Work-From-Home Tax Deductions? ›

Consider your current role and whether the following pertains to you. In a nutshell, if you're a business owner or a freelancer, or you own a farm, then you qualify to claim the home office deduction. For all other home office purposes, unfortunately, tax law doesn't currently allow a deduction.

Do I qualify for the home office tax deduction? Generally speaking, to qualify for the home office deduction, you must meet one of these criteria: Exclusive and regular use: You must use a portion of your house, apartment, condominium, mobile home, boat or similar structure for your business on a regular basis.

Generally speaking, self-employed individuals are eligible for home office deductions if part of their homes are used "regularly and exclusively" as their principal place of business or a place to meet or deal with customers, clients or patients in the normal course of business.

If you work from home for part of the year, only include expenses incurred during that time. Under the simplified method, you deduct $5 for every square foot of space in your home used for a qualified business purpose. Again, you can only claim the deduction for the time you work from home.

Internet bills are one of the work from home tax deductions self-employed individuals can take. Utilities are considered a home business tax deduction. When deducting a cell phone for business, you can only write off the business use portion.

Deductible expenses for business use of your home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance, and repairs.

Cons of a Home Office Deduction

The portion of the gain attributable to the home office use would be subject to capital gains taxes, which may result in a tax bill higher than any savings the homeowner may have seen from the home office deduction, depending on the size of the capital gain.

You can write off a percentage of your electricity bill that is equal to the percentage of space that your office occupies in your home. For example, if your home office occupies 20% of the space (square footage) in your home, then 20% of your electricity bill can be used as a tax deduction.

For employees living in Alabama, Arkansas, California, Hawaii, Minnesota, New York and Pennsylvania, though, "there is a silver lining," Rigney said. These seven states let their residents deduct unreimbursed employee business expenses on their state income tax returns.

One of the few circ*mstances in which homeowners insurance premiums can be deducted on a tax return is when a policyholder has a home office. A homeowner can deduct from their homeowners insurance premiums the same percentage of housing expenses that were allocated toward the home office.

Can you write-off utilities if you work from home? ›

The home office deduction, calculated on Form 8829, is available to both homeowners and renters. There are certain expenses taxpayers can deduct. These may include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.

The IRS offers a simplified home office deduction for those who prefer a simplified approach. Instead of calculating actual expenses, you can use a standard deduction based on the square footage of your home office. As of the last update in 2022, the rate is $5 per square foot, up to a maximum of 300 square feet.

Home-office expenses eligible for a California tax write-off can include desks and chairs, as well as a portion of your rent, utilities, homeowner's insurance or renter's insurance and repair and maintenance costs.

You can claim a home office deduction if both of these apply: You use your home exclusively and regularly for administrative or management activities of your trade or business, and. There's no other fixed location where you conduct substantial administrative or management activities of your trade or business.

If 30% of your time on the phone is spent on business, you could legitimately deduct 30% of your phone bill. In Entrepreneur magazine, writer Kristin Edelhauser recommends getting an itemized phone bill, so you can measure your business and personal use and prove your deduction to the IRS.

To be able to deduct your internet bill, calculate the percentage of the time spent on business activities and use that as your baseline. So if your internet bill comes to $80 a month and you figured out that you spend about 50% of your time online for your business, you can deduct half that amount.

Unfortunately, the IRS does not allow you to write off mortgage payments as a deduction from your taxable income. So, there's no place for home office mortgage deductions in the IRS rule book.

You can't deduct your mortgage payments. Mortgage interest and rent payments can be deducted, but only the portion that applies to your home office. The IRS has a home office deduction worksheet that will help you calculate this (scroll to the bottom of the document).

You sell products at wholesale or retail as your trade or business. You keep the inventory or product samples in your home for use in your trade or business. Your home is the only fixed location of your trade or business. You use the storage space on a regular basis.