Working from home can offer some attractive tax advantages. If you qualify for the home office deduction, you can deduct all direct expenses and some of your indirect expenses related to working from home. However, keep in mind that qualifying for such deductions became more difficult under the Tax Cuts and Jobs Act of 2017 (TCJA).
If you previously claimed a home office as a miscellaneous deduction on your individual income tax return, the TCJA eliminated that deduction for tax years 2018-2025. You must now file a Schedule C on Form 1040 to be eligible for the home office deduction.
What space can you qualify for?
Direct expenses are costs that apply only to your home office. The cost of painting your home office is an example of a direct expense. Indirect expenses are costs that benefit your entire home, such as rent, deductible mortgage interest, property taxes, and homeowner’s insurance. You can deduct only the business part of your indirect expenses.
Your home office could be a room in your home, a part of a room in your home, or a separate building next to your home that you use to conduct business activities. To qualify for the deduction, that part of your home must be one of the following:
Your main place of work. This requires that you demonstrate that you use part of your home exclusively and regularly as the primary place of business for your trade or business.
A place where you meet clients, clients or patients. Your home office may qualify if you use it exclusively and regularly to meet with clients, clients, or patients in the normal course of your trade or business.
A separate and independent structure that is used in connection with your trade or business. A shed or garage with no attachments may qualify for the home office deduction if it is a place that you use regularly and exclusively in connection with your trade or business.
A place where you store inventory or product samples. You should use the space on a regular basis (but not necessarily exclusively) for the storage of inventory or samples of products used in your trade or retail or wholesale business.
Note: If you reserve a room in your home as a home office and also use the room as a guest bedroom or study, it will not meet the “exclusive use” test.
Simplified option
If you prefer not to track your expenses, there is a simplified method that allows qualifying taxpayers to deduct $ 5 for each square foot of office space, up to a maximum of 300 square feet.
The great aspect of this is that you don’t have to consider home office depreciation and it can change from year to year unlike other deductions.
