There are about 5 million people who work from home. Bloggers, freelancers, remote workers, and gig economy players are enjoying the benefits of working from home.
There may be some tax advantages, too. The home office deduction is one of the biggest benefits of working from home.
The IRS has pretty strict rules about writing off home expenses. You don’t want to get into an audit situation to find that you did it all wrong.
Want to know more? Keep reading to learn about taking home office deductions to lower your tax bill.
The Rules Around Home Office Deductions
Do you qualify for a home office deduction?
You can qualify if you’re self-employed, you may be able to take the deduction. The big decider is whether or not you use part of your home exclusively for business.
If you have a separate room in the house that you use as an office, the answer is yes. If you sit at a kitchen table to do your work, that won’t count because that area isn’t used exclusively for business.
Your home also has to be your principal place of business. If you rent an office in one place, you probably won’t be able to claim both an office and a home office. You’d want to check with a tax professional about that.
I’m an Employee. Do I Qualify for Home Office Deductions?
One of the changes to come out of the Tax Cuts and Jobs Act of 2017 is how remote workers are treated.
Up until the tax law was passed, employees who worked remotely would qualify for home office deductions, provided that they passed the other tests.
The deductions couldn’t exceed more than 2% of their income. For some people, that could mean big tax savings for remote workers.
After 2018, this deduction was removed for employees, leaving them to scramble to pay more in taxes. This will be in effect until 2025. At that point, it’s anyone’s guess as to whether or not that will be reinstated.
What Can You Deduct?
If you learned that you qualify for the home office deduction, what exactly can you deduct? You can deduct a number of things.
You have two ways to calculate the deduction. You can deduct $5 a square foot up to 300 feet. You can also divide the square footage of the space used for business and divide it by the total square footage in the home.
You then apply that percentage to your utilities, rent or mortgage, insurance, fees, internet, phone, and repair costs.
During the year, you can make taxes easier on yourself by going to www.paystubcreator.net and print pay stubs. This way, when tax time rolls around, you can have your income and home office deductions ready to go.
Lower Your Tax Bill with a Home Office
There are a lot of advantages to working from home and having your own business. One of them is lowering your tax bill with home office deductions.
Now that you know more about working from home, you’re going to want to get the latest tech in your home office. Check out this site for the latest tech deals.
