As a result of the COVID-19 pandemic, many people who do not typically work from home are doing so now. And many workers will continue to do so for the foreseeable future. This brings up an interesting question, “Do I qualify for a tax deduction if I work from home?”
The Tax Cuts and Jobs Act (TCJA) that is in effect from 2018 to 2025 drastically limits the amount of people that qualify to take the home office deduction. The recently passed CARES act did not include any changes to the home office deduction. According to the TCJA, W-2 employees are not able to take advantage of the home office deduction, even if working from home. The only people eligible to take the home office deduction are self-employed individuals or independent contractors.
If you are a self-employed individual or an independent contractor, you may be able to offset some of your income with the deduction. In order to qualify for the home office deduction, you must:
- Use part of your home regularly and exclusively for work
- Conduct most business from your home office.
The deduction is computed based on the office square footage divided by the square footage of the home, called the percentage of business use. The percentage of business use is then multiplied by the home expenses. This number would also be adjusted according to the number of days the home office was used. The allowable home office expenses are deducted directly against income on a Schedule C for a sole proprietor or a Schedule E for a partnership.
The following chart from the IRS can help you determine if you qualify for the home office deduction.
In a nutshell, the pandemic has not changed anything with regards to the home office deduction. If you did not qualify for the deduction prior to now, you likely do not qualify for the deduction now. As always, the Vintage tax team is available to answer any questions you have regarding the many new tax law changes this year and how it may affect your tax situation. Feel free to contact us today to learn how we can help.