Skip Navigation

The Home Office Tax Deduction: An Overview

For reasons we’re sure you’re all familiar with by now, there’s a good chance you used your home as your office space in 2020 and will do so again in 2021. Using your home as an office space may mean that you can deduct those expenses on your taxes. It’s available to both homeowners and renters and is applicable for just about any kind of home. Let’s take a look at the basics of the home office tax deduction.

The home office tax deduction is more nuanced than you might suppose. Here’s what you need to know.

Simplified Claims

The IRS offers a simplified option for determining the home office deduction for taxable years beginning on January 1st, 2013. The regular method for claiming can have some calculation and allocation requirements that can be somewhat complex, which may not make it advisable for small business owners. However, the simplified option can make recordkeeping much easier since they can multiply a rate by the allowed square footage of the office instead of figuring out all the details of the actual expenses.

Regular Claims

If you use the regular method, which is required for any tax year 2012 or prior, you need to determine what the actual expenses of your home office are. This could include calculating mortgage interest, utility costs, repairs, and insurance. This is because the regular method is a way of determining what percentage of your home is actually devoted to business use. In other words, if an entire room is dedicated to your work, you need to figure out what percentage of your home that is.

Requirements to Claim

Either way, it must be true that the space must be regularly and exclusively used for your work and also is the principal place of your business. If you worked primarily at home but occasionally used other spaces, it would still meet the criteria of the home office tax deduction. Separate spaces like a garage or studio could also be used in the same way and doesn’t even need to be the principal place of your business, as long as you exclusively and regularly use it to conduct business. However, if the use of a room or space within your home is just an occasional arrangement, this would not qualify as being the principal place of business.

Contact Bowman & Company Today

Bowman & Company CPA, PC provides all of our individual and small business customers with experienced, accurate, and affordable financial services. Our financial services aim at decreasing your taxes and increasing your net worth through responsible, timely, and accurate recordkeeping. We offer our services to clients throughout the Washington, D.C. metropolitan area including Maryland and Baltimore County, Columbia, and Howard County. For more information on our offerings, contact us online or call us at (410) 381-8121. You can also find us on Twitter,  Linkedin,  Facebook, and  Youtube.

This entry was posted on Wednesday, April 21st, 2021 at 11:49 am. Both comments and pings are currently closed.