Call us on

Tax Advantages of Working From Home Office

  Sanjiv Gupta CPA  Published 
Tax Advantages of Working From Home Office

Working from home is becoming more and more popular, with the number of people working from home rising by over 50% in the last two decades. This is not surprising given that many people are looking for ways to cut down on commute time or improve their work-life balance.

Many employers allowed employees to work from home during the Covid 19 Pandemic. Working from home came with many tax advantages.

Please note that working from home is NOT the same as “Home Office”: While the two are often used interchangeably, they do not mean the same thing. “Home Office” is a legitimate tax deduction that can save you thousands of dollars each year in taxes if your home qualifies as office space for work purposes.

As long as you have a dedicated space in your house for work, the IRS allows employers to save on office costs by enabling employees to work from home. Any additional deductions other than the cost of business use are not allowed under this rule.

The Home Office Tax Deduction allows homeowners who use their office space for business purposes to claim a deduction of up to $1500.

This rule only applies if the home is your primary place of work and you use this area regularly and exclusively for administrative or management activities such as:

-meetings with customers, clients, or patients;

-employee conferences;

-training seminars;

-telephone calls with employees or others involved in the business.

The IRS requires that you use this home office space for work at least 500 hours during a six-month period, which must include every weekday. This does not mean that you have to spend each hour of your time working, but it does mean that if you are doing work-related activities for at least eight hours a day, five days a week, it is considered “regular” use.

You are not allowed to write off the cost of household expenses such as housekeepers or gardening services.

You need to keep accurate records, including receipts, time, date, activity performed at home (e.g., working on business books) when you used your home office.

These records are also required when claiming a deduction for travel expenses, which can be deducted when traveling between your home and another work location in the same trade or business. This is known as the commuting rule. It would be best to determine how many days you traveled to that other place specifically for work purposes during the year. If it is five or more days, you can only deduct the proportion of your travel costs representing a business expense. Otherwise, it will be considered personal commuting and not deductible.

The IRS also provides additional tax incentives for businesses that invest in renewable energy sources such as solar panels by allowing them to receive a 30% investment credit on qualified expenditures made toward purchasing the solar panel system.

The IRS provides a safe harbor method for determining whether expenses qualify as deductible home office expenses. The qualified portion is 100% deductible each year regardless of how much time you spend in your office or what activities are performed there.

Home office supplies, such as pens and paper clips, may be deducted if they are used for both personal and business purposes. Personal use is deductible but only to the extent of your cost basis in the items (i.e., what you paid plus any improvements). If you do not keep records or receipts on hand, then it can be deducted based on how frequently you use the supplies for personal or business purposes.

The first advantage is that you can claim a deduction for any expenses incurred in running your home office. This includes items such as stationary, the cost of internet access and even part of your rent or mortgage repayments (though there are limits to this). You cannot however deduct personal expenses like food costs which you would incur if working from home, so the deduction will only apply to the business expenses.

The second advantage is that you can claim a home office tax deduction if your work requires you to be at home for long periods or regularly return late from work. This means that even though you are not working away from your house, it may still qualify as an allowable expense under certain circumstances. The home-office deduction is calculated by allocating a percentage of your home expenses to the space used for work.

If you use more than one room in your house or apartment and part of that space is set aside exclusively as an office, then it may qualify for this deduction. The size of the portion would be determined on whether it’s reasonable to expect that someone would work in the space.

The third advantage is if you are self-employed and have a home office, then you can deduct expenses for your home at the end of each year as long as it’s used exclusively for business purposes (i.e., not able to be used by anyone else). This deduction applies regardless of whether you rent or own your home. Even if you live in a rented property, some expenses can still be claimed, such as part of the cost of repairs and maintenance, which would apply to any damage that occurred due to using an area for work purposes (i.e., holes burnt into carpets).

The fourth advantage is that employees who travel long distances to work can claim a deduction for the cost of traveling from their home to work.