TurboTax Premium searches 500 tax deductions to get you every dollar you deserve. Special rules apply if you qualify for home office deductions under the day care exception to the exclusive-use test. Taxpayers who use a home office exclusively to manage rental properties may qualify for home office tax status but as property managers rather than investors. If your home office is in a separate, unattached structure — a detached garage converted into an office, for example — you don’t have to meet the principal-place-of-business or the deal-with-clients test. As long as you pass the exclusive- and regular-use tests, you can qualify for home business write-offs. • For tax year 2022, the rate for the simplified square footage calculation is $5 per square foot, with a maximum of 300 square feet.

Whether your work-from-home arrangement is temporary or here to stay, you probably have questions about the impact of the home office on your 2022 taxes. In this article, we’ll discuss the home office deduction, how do taxes work for remote jobs changes in the tax law, and how the home office deduction might apply to your situation. Since the start of the Covid-19 pandemic, there has been a dramatic increase in remote and hybrid work.

Credits & Deductions

But it’s better to find that out now than to erroneously claim that deduction and have your tax return rejected or audited because of it. If you sell your home for a profit, you’ll owe capital gains taxes on the depreciation. Whenever you’re claiming deductions, it’s essential to keep good records so you can provide them to the IRS if necessary. Most other employees will not be allowed to claim practically any expenses against their W-2 income. These workers will enjoy the benefit of getting their employer to cover half of their Medicare and Social Security tax which independent contractors have to pay themselves, thus spending an extra 7.65% of their paycheck.

• For those who have been working from home for an employer during the pandemic, the IRS suggests asking your employer to reimburse you for reasonable and necessary costs you’ve incurred during this difficult time.
• But for a space to qualify for a deduction, it has to be used exclusively for business purposes.
• First, you can figure out what you spent on housing and utility expenses and then take a proportionate deduction based on the size of your home office relative to your whole house.
• This article will delve into the most common questions about this tax deduction.
• Because of this calculation, people with larger homes may not get as much using this method, said Adam Markowitz, an enrolled agent and vice president at Howard L Markowitz PA, CPA in Leesburg, Florida.
• If you work and live in different states and municipalities or if you lived in multiple states throughout the year, you may have to file state or local taxes in each jurisdiction.

A handful of states will let employees take deductions on home office expenses in their state income taxes. These states are Alabama, Arkansas, California, Hawaii, Minnesota, New York and Pennsylvania, according to Peter DeGregori, managing partner of Vertical Advisors, an accounting firm based in Newport Beach, Calif. In short, business owners, freelancers or gig workers who use a home office or home office space 100% of the time for work reasons.

Are there downsides to the home office deduction?

An easier calculation is acceptable if the rooms in your home are all about the same size. In that case, you can figure out the business percentage by dividing the number of rooms used in your business by the total number of rooms in the house. Clearly, if you use an otherwise empty room only occasionally and its use is incidental to your business, you’d fail this test.

For those who have been working from home for an employer during the pandemic, the IRS suggests asking your employer to reimburse you for reasonable and necessary costs you’ve incurred during this difficult time. Just know that your employer has no obligation to reimburse you for such expenses. You can deduct $5 per square foot, up to $1,500 or 300 square feet, per year for your exclusive home office space if it’s used for the full year. If you only use that space part of the time, then you prorate that amount, Tippie said.

Here’s what taxpayers need to know about the home office deduction

Rocky Mengle was a Senior Tax Editor for Kiplinger from October 2018 to January 2023 with more than 20 years of experience covering federal and state tax developments. Before coming to Kiplinger, Rocky worked for Wolters Kluwer Tax & Accounting, and Kleinrock Publishing, where he provided breaking news and guidance for CPAs, tax attorneys, and other tax professionals. He has also been quoted as an expert by USA Today, Forbes, U.S. News & World Report, Reuters, Accounting Today, and other media outlets. For example, if you have a 300-square-foot home office (the maximum size allowed for this method), and you work from home for three months (25% of the year), your deduction is $375 ((300 x $5) x 0.25).

• And filing taxes in multiple states is just one of many complications that make figuring out your state and local tax obligations so difficult.
• An unprecedented number of workers and businesses have transitioned to a work-from-home model.
• Prior to passage of the 2017 Tax Cuts and Jobs Act, employees could possibly include unreimbursed business expenses if they worked from home at the convenience of their employer.
• If, however, you’re looking to get reimbursed for these expenses through your taxes, you’re probably out of luck.

“But you have to have a general sense of how much of it really is business and don’t round up.” You may have moved your standing desk into the spare bedroom, but that doesn’t guarantee it’ll qualify for a home office space deduction. Your home workspace’s eligibility for a tax deduction depends on your employment status and how you use the space. CNBC Select spoke with two CPAs to get their advice on what remote workers should pay attention to this tax season and how to go about preparing their taxes. As with your home office, other tools that are necessary for you to work as an independent contractor can also be deducted. For instance, if you work as an online freelancer, you will need to have reliable internet access.