Home office tax deduction 2022: Here’s who qualifies and how it works

With so many workers going remote and staying that way, their approach to doing their taxes may be changing. Cannon Advisors’ Bryan Cannon shares some tips to assist remote workers in navigating their 2021 taxes. Taking the home office deduction does not significantly increase your chances of being audited.

Being an employee doesn’t mean you can’t also claim the deductions you’re entitled to as a self-employed person. As the name suggests, the simplified option makes calculating your deduction amount easy. You can deduct $5 per square foot of office space for up to 300 square feet (or $1,500). If you use 20% of your home as an office, you can deduct 20% of your mortgage or rent.

Choose between the standard and simplified methods.

If you use the actual expense method to calculate the tax break, also complete Form 8829 and file it with the rest of your tax return. If you use more than one home for business, you can file a Form 8829 for each home or use the simplified method for one home and Form 8829 others. Combine all amounts calculated using the simplified method and amounts calculated using Form 8829, and then enter the total on Line 30 of the Schedule C you file for the business. And if you’re self-employed, the home office tax deduction may also be available — if you can satisfy all the requirements. If you’re a regular employee working from home, you can’t deduct any of your related expenses on your tax return.

• Many people who found themselves working remotely took the opportunity to relocate to low-tax states or areas that better suit their lifestyle, such as the beach or mountains.
• Maybe your office went entirely remote and you’ve been having daily Zoom meetings with coworkers and clients.
• For taxpayers going down this route, the Schedule C form will ask for the total square footage of a home and then it will ask for the square footage of the home used for business.
• The deductions have to be related to your self-employed income rather than your employee work.
• We’ll search 500 tax deductions & credits to provide comprehensive coverage.
• Instead, it is all employer-driven while the employee relies on a salary that is usually paid out annually instead of through hourly rates.

As with the regular-use test, whether your endeavors qualify as a business depends on the facts and circumstances. The more substantial the activities, in terms of time and effort invested and income generated, the more how do taxes work for remote jobs likely you are to pass the test. In addition to passing the exclusive- and regular-use tests, your home office must be either the principal location of that business or a place for regular customer or client meetings.

Be sure to take advantage of the home office tax deduction.

If you have a tax pro and want to ask questions about home office tax deductions or have other coronavirus related tax questions, schedule a call with your tax pro. The number of employees working from home has grown considerably due to the COVID-19 pandemic. Just a few years ago, these employees may have been eligible for tax deductions that were unavailable to in-office employees. Now, with only a few exceptions, only self-employed people are eligible to claim tax deductions when working from home.

There may be some confusion, as the home-office deduction was previously allowed for employees. The Tax Cuts and Jobs Act of 2017, however, banned such workers from taking the deduction from 2018 to 2025. If you use your home office for your W-2 job and your side gigs, you won’t be able to claim your home office as a tax deduction. You can claim a percentage of expenses such as rent, mortgage interest, utilities, insurance, and repairs.