Can I Write Off My Home Office?

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With remote work becoming part of the new normal, you might be wondering if you can write off your home office. If the following requirements are met, you might be able to receive compensation.

Although millions of Americans worked from home this year, the tax law has limitations. Here’s what you need to know about home office write-offs.

Is My Home Office Eligible?

The write-off can only be applied to self-employed people, gig workers, or independent contractors.

It does NOT apply to taxpayers employed by businesses that give a W-2 form or a paycheck, even if that person is currently working from home. This may be confusing because the Home Office deduction used to include these kinds of workers, but the Tax Cuts and Jobs act of 2017 changed these parameters.

What Constitutes a Home Office?

The main requirement is that taxpayers must use part of their home or a separate structure on their property consistently and exclusively for their business. That space can be used for inventory storage, client meetings, or rental space as long as it is for the business.

Houses and other nontypical homes such as apartments, mobile homes, boats, and other similar residences qualify for the write-off.

What if I Quit My 9–5 Halfway Through the Year?

You can take a partial deduction. If, for example, you quit your 9-5 and started a business halfway through the year, then you can deduct the expenses for the portion of the year you met the eligibility requirements.

How It Works

There are two different ways you can calculate your home office write-off. There are pros and cons to each method, and the best one for you might switch from year to year.

Simple Method

This method is called “simple” because all it bases the calculation on is how many square feet your home office is. Each square foot is worth $5. With this method, there’s a cap of $1500, which is 300 sq ft at $5 per square foot. Your home office must only be used exclusively as an office to use this method.

Regular Method

This route requires you to keep track of all your actual expenses, as you may be able to write off up to 100% of costs, for example, repair costs. Other possible deductions include mortgage interest, real estate tax, utilities, rent, and insurance. These deductions are based on the size of your home office in relation to the size of your home. If your office is 5% of your living space, you can deduct 5% from those costs.

Have Questions?

Every home office is different. Contact us to talk to one of our tax experts to discuss the right decision for you.