In 2020, more people than ever before have spent at least some time working from home. In fact, at one point, about 50% of adults were working remotely on a regular basis.
As a result of this, there are going to be a whole lot of people claiming a home office deduction when they file their taxes at the top of next year. If you’re planning to be one of them, it’s going to be important for you to take the right steps to ensure that you qualify for the home office tax deduction.
Many people get very confused when it comes to claiming the IRS home office deduction and aren’t sure how to go about doing it. But it’s actually not as complicated as you might think.
Check out how you can attain the home office deduction on your taxes below so that you can benefit from spending some or all of 2020 working out of your house.
Start by Making Sure You Have a Home Office Set Up
This might seem like it should go without saying. But in order to claim the home office deduction on your taxes, you’re going to need to actually have an office set up in your home that you use for business purposes.
Your home office doesn’t have to be an actual office that’s cut off from the rest of your home. But it does have to be a space that you’ve dedicated to doing work.
There are some people who are under the impression that they can claim the home office deduction simply by working from their kitchen tables. But that is not what the IRS would consider a home office.
If you’re thinking about trying to attain the home office tax deduction and you don’t have a dedicated workspace set up, now would be a great time to do it. You can use these office design tips to pull your home office together in a hurry.
Think About How Much Time You Actually Spend Working in Your Home Office
In the eyes of the IRS, just setting up an office space in your home isn’t enough to claim the home office deduction. You also need to use it “regularly and exclusively” for running whatever business it is that you run out of your home.
If you have another office space somewhere else that you also use, then you will not be able to attain the home office deduction. You’re going to be out of luck since the IRS will consider that to be your primary workspace, not the home office that you have.
You should consider how long you spend working in your home office each and every day before claiming the IRS home office deduction. If you don’t use it all the time for whatever work that you do, then attaining a deduction for it isn’t going to be a possibility.
Learn About the Two Main Ways in Which You Can Claim a Home Office Deduction
If you believe that you qualify for a home office deduction and you’re ready to do it, you’re going to need to take some time to learn about the two main ways that you can claim this deduction on your taxes. You can take either:
- The simplified option
- The standard option
The simplified option is, as its name would suggest, the easier of the two options with regards to claiming it on your taxes. You won’t have to crunch too many numbers to do it.
Those who take the simplified option when claiming the home office deduction will have to measure the square footage of their office space. They’ll then be able to deduct $5 for every square foot of their office, up to 300 square feet or $1,500. This will make it super simple for you to attain the deduction.
Those who take the standard option, meanwhile, will have to do a little bit more work when it’s time to claim their deduction. Reason being, they’ll have to calculate all the expenses that they rack up throughout the year while living in their home and then multiply it by the percentage of their home that their office takes up.
This means that if your home office takes up, say, 10% of the square footage of your home, you can deduct 10% of your total expenses. These expenses often include everything from your mortgage interest to your home insurance to your utilities.
Oftentimes, this will give you a much larger home office deduction than you would get if you were to use the simplified option. But it’s going to take some more effort on your part to pull together all the numbers you’ll need to claim your home office deduction.
Take the Home Office Deduction on Your Taxes
At this point, you should be just about ready to take the home office deduction on your taxes. It’s just a matter of punching the right numbers into your tax forms.
If you’re going to go with the simplified option, you can use Schedule C, which you’ll be using to enter your business income and expenses, to claim your home office deduction. If you’re going with the standard option, you’ll want to use Form 8829 to break down the specific expenses that you’ll be using as part of your claim.
Either way, you should find that it’s not too difficult to claim a home office deduction. You should take advantage of this IRS write-off if you can.
Do You Qualify for a Home Office Tax Deduction? Find Out Today
Not everyone is going to qualify for a home office deduction. The IRS has cracked down on people trying to claim this deduction when they aren’t entitled to it.
You may want to speak with an accountant before you do it just to make sure you’re allowed to write off the expenses. It’ll make you feel better about filing your taxes with a home office tax deduction included.
Would you like to get more advice on filing taxes and taking care of your personal finances? Browse through the Finance articles on our blog to find more tax tips and home office advice.