< Back to Thought Leadership

Tax Benefits of Working from Your Home

Working from home has its perks – you can skip the commute, have a more flexible schedule, and forego “business professional” dress on many occasions.  If you work from home, you may also be eligible to deduct home office expenses on your tax return. Deductions for these expenses can save you a bundle, so long as you meet the tax law qualifications.

Under the Tax Cuts and Jobs Act, employees can no longer claim the home office deduction. However, if you run a business from your home or are otherwise self-employed and use part of your home for business purposes, the home office deduction may still be available to you.

If you’re a homeowner and use part of your home for business purposes, you may be entitled to deduct a portion of actual expenses such as mortgage, property taxes, utilities, repairs and insurance, as well as depreciation. Or you might be able to claim the simplified home office deduction of $5 per square foot, up to 300 square feet ($1,500).

Requirements to Qualify

To qualify for home office deductions, part of your home must be used “regularly and exclusively” as your principal place of business, defined as follows:

  1. Regular use: You use a specific area of your home for business on a regular basis. Incidental or occasional business use isn’t considered regular use.
  2. Exclusive use: You use a specific area of your home only for business. It’s not required that the space be physically partitioned off. But you don’t meet the requirements if the area is used for both business and personal purposes, such as a home office that you also use as a guest bedroom.

Your home office will qualify as your principal place of business if you 1) use the space exclusively and regularly for administrative or management activities of your business, and 2) don’t have another fixed location where you conduct substantial administrative or management activities.

Examples of activities that meet this requirement include billing customers, keeping books and records, ordering supplies, setting up appointments, forwarding orders, or writing reports.

Other Ways to Qualify

If your home isn’t your principal place of business, you may still be able to deduct home office expenses if you physically meet with patients, clients or customers on the premises. The use of your home must be substantial and integral to the business conducted.

Alternatively, you may be able to claim the home office deduction if you have a storage area in your home — or in a separate free-standing structure (such as a studio, workshop, garage or barn) — that’s used exclusively and regularly for your business.

An Audit Target

Be aware that claiming expenses on your tax return for a home office has long been a red flag for an IRS audit, since many people don’t qualify. But don’t be afraid to take a home office deduction if you’re entitled to it. You just need to pay close attention to the rules to ensure that you’re eligible — and make sure that your recordkeeping is complete.

The home office deduction can provide a valuable tax-saving opportunity for business owners and other self-employed taxpayers who work from home. Keep in mind that, when you sell your house, there can be tax implications if you’ve claimed a home office. Contact us if you have questions or aren’t sure how to proceed in your situation.

If you use a space in your home for business purposes, contact your Blue & Co. advisor to see if you qualify for the home office deduction.

Ways Your Taxes will Change in 2020

Ways Your Taxes will Change in 2020

Even though the New Year is just upon us, and we are working diligently to get our taxes filed for 2019, it is also time to start looking ahead to the 2020 tax year. As it happens, just before the holidays, two important pieces of tax legislation were passed as part of a year-end appropriations […]

Learn More
340B Recertification Reminder

340B Recertification Reminder

Consolidated Health Center & FQHC Look-a-Likes The 2020 Grantee recertification period for Consolidated Health Centers, Federal Qualified Health Center Look-Alikes, Ryan White, Comprehensive Hemophilia Treatment Centers, Native Hawaiian, Black Lung Programs, Urban Indian, and Tribal Compact 638 will be January 27-February 24, 2020. Mandatory Requirement Health clinics must complete their recertifications through the Office of […]

Learn More
Exempt Organization Highlights of Spending Package’s Tax Law Changes

Exempt Organization Highlights of Spending Package’s Tax Law Changes

While the Further Consolidated Appropriations Act, 2020 (Act) brought about extensions for certain credits and deductions, it also brought the following two changes for exempt organizations: Parking Tax Retroactively Repealed The Parking Tax imposed under Internal Revenue Code Section 512(a)(7) has now been retroactively repealed.  Exempt organizations will no longer owe this tax and are […]

Learn More