The deadline to file your income tax return is quickly approaching and April 15th will be here before you know. If you haven’t yet filed your tax return, and you’re a remote worker who has a home office, you should be aware of the home office tax deduction. This deduction can help self-employed individuals who use part of their home for business activities.
Who’s eligible?
This deduction works for small business owners who operate out of their homes as well as freelancers and gig workers who use part of their homes for work purposes. The deduction allows you to write off many business expenses like rent, utilities, maintenance, and real estate taxes. Renters and homeowners are eligible for this deduction. When you’re filling out your income tax return, you can find this information on Form 1040 on Schedule C. W-2 employees who work from home are not eligible for the deduction.
It’s important to know that dual-use rooms are not always deductible. If your office space doubles as a guest room or home gym, it’s generally not applicable for this deduction. The two exceptions to this rule are when the room is used to provide care to children, disabled individuals, or adults over 65, or when your other use of the space is to store business-related equipment and supplies.
Other things to know
To take advantage of this deduction, your home workspace must be the main place where you conduct your business. You must calculate your home office tax deduction using one of the accepted methods. With the simplified method, you calculate the square footage of your workspace and multiply that by $5 per square foot to get your deduction. The other method is more complicated and requires you to calculate your business expenses and deduct those from your overall home expenses.
If you wish to take advantage of the home office tax break, be aware of eligibility rules so that you’re in compliance. If you work with an accountant, they can help you figure out if this deduction is advantageous to your financial situation. As a freelancer or self-employed individual, it’s important that you use the benefits available to you.
