What is a home office and do you qualify for a deduction?
A home office per the IRS is, “use of your home exclusively and regularly for conducting business”. During the Coronavirus, many could probably say this applies to them, but the issue is, not all will be able to use the deduction.
To qualify for a home office deduction, you will need to have what is called a Schedule C on your tax return. A Schedule C is a form that gets filed with your individual tax return if you are a single-member LLC or an individual who might otherwise collect a 1099misc at the end of the year.
This means that individuals who have wage-based jobs will not qualify for the deduction. Unfortunately, with the new tax code the miscellaneous itemized deduction section of the return has been removed for a larger standard deduction. What this means is that if you are an individual who collects regular pay from your employer with social security and Medicare withheld, you will not qualify for the deduction.
If you are an LLC or an individual that receives a 1099misc at the end of the year, there are some very specific qualifications in order to use this deduction. These mainly are:
· Exclusively and regularly as your principal place of business (see Principal Place of Business, later)
· 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
(Per IRS Publication 587)
If you meet these requirements you could deduct a portion of your home’s:
· Utilities
· Mortgage Interest
· Insurance
· Repairs
· Maintenance
· Property Taxes
· Etc.
This deduction can be used even if you do not qualify to itemize on your taxes. Furthermore, there is a simplified method which you can use instead of calculating your deduction which is $5 multiplied by the total square footage of your home; used exclusively for business purposes. This does have a limit of 300 square feet.
If you think you might qualify for a home office deduction or have questions about a home office deduction, please contact us. Our email address is michael@accountingpersonalized.com and our phone number is 352-224-9530.
