Coronavirus Home Office Deductions

A Stanford University study reported that more than 40% of the US Labor force is now working from home.    The next question is do I get a tax benefit for a home office?  The quick answer is probably not.   Even though your spare room or dining rooms have been converted into office space, recent tax law changes have eliminated that benefit for w2 employees.

According to the IRS.gov website, “Employees are not eligible to claim the home office deduction”.  Small business owners, self-employed individuals, and partners in partnerships – because they are not employees – can deduct home office expenses on their personal tax returns.  However, if the taxpayer is reimbursed for home office expenses, related utilities or supplies, those expenses are not deductible.

IRS Publication 587 outlines the home office qualifications.  The space should be used “regularly and exclusively” and should be the “principal place of your business” exclusively and regularly” as your principal place of business.  Do you meet your clients, vendors, patients or customers in the normal course of business there?  If you answered yes, then you are most likely eligible for a home office deduction.

Your home office can be an area of your home, there is no requirement that it be an exclusive room.  It should, however, look like an office.  A separate free standing structure, such as a studio, garage, or barn qualifies as long as it is used exclusively and regularly for the business.

Please reference IRS Publication 587 or contact your tax professional to determine your home office eligibility and the eligible expenses that should be considered.  A little bit of work on the front end can save your hard earned money.