October 20, 2021
Home office tax deductions: Know the rules

Those who are self-employed are eligible to claim expenses that add up, saving money over time.

Working from home when you're self-employed brings tax deductions you may not be aware of. Both homeowners and renters are eligible to claim home office tax deductions. So it is worth your while to know the standards the IRS requires for this deduction, understanding what you are entitled to claim.

Tax deduction questions on working from home while self-employed

Q: So what are the main rules for the home office deduction?

A: Simply put, your home office must be the principal place of your business. That doesn’t mean you can’t attend meetings occasionally at your company office or meet clients at their offices or coffee shops. It means that most of the time, you are working from your office and can claim that room or space as a deduction.

Q: I work out of a guest house on my property/an apartment/a garage. Am I still eligible to claim a home office deduction?

A: Yes. If you're self-employed, not only does the deduction apply to all kinds of homes, whether cottages, mansions, tenement houses, owned or rented property, it also applies to other free-standing structures on the property where you live. The workspace for which you are claiming the deduction just must be in regular and exclusive use for your business, and the principal place of your business.

Q: I use a small corner of my living room for my work-from-home business, with a desk set up there. It isn’t a home office with walls and a separate door. Does this qualify for a home office deduction?

A: Yes, you just need to figure the percentage of that space that is dedicated to your business activities, compared with your home overall. Your accountant can help you with this. (Remember, it must be where the principal amount of your business activities take place, not just a convenient place where some of your after-work hours calls or emails are handled.)

Q: I store work items at home but work elsewhere. Am I entitled to a home office deduction?

A: Maybe. There is a deduction allowance for inventory, as long as you are selling the items wholesale or retail, using an area of your home to store the inventory. Your accountant can tell you more.

Q: Is it just a portion of my rent or mortgage that I can claim as a tax deduction for my home office deduction?

A: Have your accountant review your expenses to ensure you aren’t missing any. But examples of home office deductions might include a percentage of your home’s depreciation, trash removal service, utilities and cleaning services.

Kerby Accounting & Business Solutions is here for your questions on home office deductions or any other facets of business tax matters. Give us a call today.

Susan Shalhoub

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