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October 6, 2021
Like millions of remote workers in the U.S., if you’re working from home full-time to reduce your exposure to the delta variant, you probably can’t write off home office costs on your taxes.
The IRS’ “unreimbursed employee expense deduction” is now off the table for most employees forced to work from their homes. So, why is this the case?
Enacted before the pandemic, the Tax Cuts and Jobs Act of 2018 put the deduction and other “miscellaneous itemized deductions” on ice for those who work for an employer. Employees who work out of their abode full-time no longer qualify for the home-office tax deduction. This includes anyone who receives a regular paycheck or W-2 from their employer.
Nevertheless, there is a silver lining for entrepreneurs and independent contractors who work remotely.
This tax deduction allows eligible individuals to write off expenses directly related to maintaining their home office. This is defined as any part of your home that you use exclusively and regularly for your business.
Homeowners and renters who meet the IRS’ conditions are eligible for the deduction, and it applies to all types of homes, such as condos, apartments and mobile homes. It also includes structures on the property, like an unattached garage, barn, studio or greenhouse
After the Tax Cuts and Jobs Act suspended the business use of the home-office deduction from 2018 through 2025 for employees, it became available exclusively for self-employed taxpayers, independent contractors and people working in the gig economy.
People who have a side gig but also work for an employer may also qualify for the deduction.
The IRS requires eligible taxpayers to meet two conditions to claim the home-office deduction.
If you qualify as self-employed, a gig worker or independent contractor and meet the two conditions for maintaining a home office, understand that there are two ways to compute your home-office deduction:
For example: If your home-office is 200 square feet and your home is 1,000 square feet, you would deduct $1,000 under the simplified option, and 20% of allowable expenses under the regular method.
Note: You may choose either method for a taxable year. But once you have chosen a method, you cannot later in the year switch to the other method.
If you’re still planning on recouping some costs for being cooped up in your home until the pandemic subsides, keep these three pointers in mind.
Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.
Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.
Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.
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