If you are someone who was able to do their job from home, you may now be wondering if you could claim a federal income tax deduction for home office expenses. As things presently stand, the answer is ‘no’ unless you are self-employed. However, the answer could change if the government grants additional COVID-19-related tax relief.
Here’s everything you need to know about home office tax write-offs, as things stand right now.
No home office deductions for employees
Before the Tax Cuts and Jobs Act (TCJA), an employee could possibly claim itemized deductions for unreimbursed employee business expenses including home office expenses if you used a home office for the convenience of your employer. In that case, you could add the home office expenses with other miscellaneous expenses such as fees for investment advice, tax advice, tax preparation, and union dues.
If your total miscellaneous expenses went beyond 2% of your adjusted gross income (AGI), you could write off the excess if you itemized deductions.
Unfortunately, that was then. And this is now.
For 2018-2025, the TCJA suspended write-offs for miscellaneous deductions that were earlier subject to the 2%-of-AGI rule. Under current federal-income-tax law, an employee’s work from home expense is non-deductible.
That could change if the government grants additional COVID-19 tax relief in future legislation.
Self-employed folks can still claim home office deductions
If you are self-employed, you can deduct your home office expenses under the same federal income tax guidelines that applied before the TCJA.
Home office deductions are allowed if you use an area of your residence during the tax year regularly and exclusively as:
(1) a principal place of business
(2) a place to meet with clients, colleagues, or customers
For a separate structure that is not your home such as a converted barn or detached garage, deductions are allowed if you use the space regularly and exclusively for any work purpose.
A home office qualifies as your primary place of business if most of your income-earning activities happen there. It could also be your principal place of business if you use it to conduct management or administrative functions such as keeping the books and sending out invoices and don’t conduct those functions at any other fixed place.