Home Office Deductions: What Can You Deduct From Home Office Expenses

Home Office Deductions: What Can You Deduct From Home Office Expenses

Home Office Deductions in the Age of Covid-19

With so many taxpayers working from home–some indefinitely–do to Covid-19, many are likely wondering whether they can deduct their home office expenses. In short, traditional W-2 employees cannot deduct their home office expenses regardless of whether they would otherwise qualify for the deduction. The 2017 tax reform legislation eliminated this deduction for 2018-2025. Self-employed taxpayers can deduct expenses associated with maintaining a home office if the office is used regularly and exclusively as the taxpayer’s principal place of business (if the office is within the dwelling unit). A home office deduction is permitted for self-employed taxpayers with separate structures if the office/workspace is used “in connection with” the trade or business. For more information on the home office deduction, visit Tax Facts Online.

When is a taxpayer entitled to deduct expenses incurred in maintaining a home office?

A taxpayer is only entitled to deduct expenses for a home office if the taxpayer is able to meet the restrictive requirements imposed by the IRC and the courts with regard to this business deduction. A deduction for use of a part of the taxpayer’s residence as an office will not be allowed unless a portion of the dwelling is used exclusively and on a regular basis as (a) the principal place of business for any trade or business of the taxpayer; or (b) the place of business used by the taxpayer for meeting patients, clients or customers in the normal course of the taxpayer’s business.1 If the taxpayer uses a separate structure as a home office, the use requirements are less restrictive and the use must only be “in connection with” the taxpayer’s trade or business.2 A home office will qualify as a taxpayer’s principal place of business if both of the following are true:

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William H. Byrnes has achieved authoritative prominence with more than 20 books, treatise chapters and book supplements, 1,000 media articles, and the monthly subscriber Tax Facts Intelligence. Titles include: Lexis® Guide to FATCA Compliance, Foreign Tax and Trade Briefs, Practical Guide to U.S. Transfer Pricing, and Money Laundering, Asset Forfeiture; Recovery, and Compliance (a Global Guide). He is a principal author of the Tax Facts series. He was a Senior Manager, then Associate Director of international tax for Coopers and Lybrand, and practiced in Southern Africa, Western Europe, South East Asia, the Indian sub-continent, and the Caribbean. He has been commissioned by a number of governments on tax policy. Obtained the title of tenured law professor in 2005 at St. Thomas in Miami, and in 2008 the level of Associate Dean at Thomas Jefferson. William Byrnes pioneered online legal education in 1995, thereafter creating the first online LL.M. offered by an ABA accredited law school (International Taxation and Financial Services graduate program).

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