A home office deduction is available to almost any business owner and is generally a deduction of up to $5,000 per year. However, the deduction does not apply if you’re simply working from home during COVID.
To make sure you qualify, check with your tax preparer because there are specific rules about how many days per year an office must be used. For instance, a home office needs to be used exclusively by an individual who works in that space to meet client needs. People who can claim home office deduction taxes are:
1. Self-Employed Owners
This includes doctors, lawyers, accountants, real estate agents, and freelancers. There are many misconceptions about who qualifies for a home office deduction on their taxes, but all people who fall into this category can claim it. But they must prove they used the room or space exclusively to do their work.
Self-employed owners can claim a deduction for the money they spent on materials to furnish their home and additional expenses such as depreciation on furniture.
2. Owners of limited liability companies, partnerships, and S corporations
Almost everyone in an LLC, partnership or S corporation can claim a home office deduction on their taxes because it is optional to be physically present in the office to work from home. It has been clearly defined in the tax code that the home office must be used exclusively by the owner to conduct his business. People in C corporations can deduct a percentage of expenses they spend on their home office rather than a specific dollar amount.
3. People who work from home for their company
If you work for a company and do some of your work from home, you can also claim this deduction. You will need to prove that it is a principal place of business, which means that the space is for trade only and not a secondary residence. You cannot claim this tax deduction because you may have a secondary place. After all, the IRS will consider it as a personal home.
This explains who can claim a home office deduction on their taxes, it does not explain the amount of money you can and cannot claim as an expense for your home office tax deduction. If you are looking for a way to deduct costs you incur in your home or “office” space, we suggest contacting our CPA firm.
It is important to always check with your tax preparer before making any deductions or items you can consider for tax purposes that you cannot claim on your taxes.