With COVID-19, more people are working from home. Since tax preparation season is approaching, you may wonder if this change qualifies you for a home office deduction on your tax return. While you should consult a tax advisor to ensure you get all possible deductions, below is more information on the requirements for claiming a home office reduction.

Who Qualifies?

Standard employees who have been working from home for some reason do not qualify for a home office deduction. The deduction is only applicable to people who are self-employed or independent contractors, as well as freelance and temporary workers.

To claim the deduction on a tax return, you have to use part of your home—such as a room, greenhouse, or garage—as your primary place of business. This space can be for online work or as space for you to meet with clients. You must only use this area for business, and you have to use it regularly. You can qualify for the deduction whether you rent the home or have a mortgage, and it can include separate structures on the property that are for the business.

What Expenses Can You Deduct?

If you qualify for the home office deduction, you can subtract part of your home’s expenses on your tax return. This includes mortgage interest, insurance, upkeep, utility bills, home depreciation, and rent, if applicable. You must keep track of these expenses through your receipts and records.

There are two methods to determine the deduction amount. The simple method involves calculating the square footage of the business space and deducting $5 for each square foot. With this method, the maximum reduction is $1,500 for 300 square feet.

The second method is to deduct a percentage of the covered expenses that go towards your home office. To do this, you have to figure out what percentage of your home the office occupies, then deduct that amount from your indirect expenses. For example, if your home is 1,300 square feet and your home office is 300 square feet, you’d divide 300 by 1,300 to get 23%. Then, you could deduct 23% of your expenses from your taxes. Direct business expenses—such as repairs that are exclusively for the office space—can be deducted in full.

If you want to get the most deduction and ensure your tax return is accurate, work with a tax advisor at PMC Tax Services LLC in Lincoln, NE. Since 1989, they’ve been providing knowledgeable tax preparation services to the entire state, ensuring you get as much back as possible. Their rates are competitive, and they offer accurate, in-person quotes. Visit them online for more information about their services. Call (402) 467-5529 to schedule a consultation.