Who Qualifies for the Home Office Deduction?

Many people are doing their jobs from home on a sustained basis for the first time in their careers. They have had to set up a home office. Does that mean they can claim a home office deduction, even though they still have a workstation, cubicle or office at their place of work?

The bad news is that the Tax Cut & Jobs Act of 2017 severely curbed what had been a valuable home office deduction for staff people who had to do some of their work at home. Previously, people could deduct unreimbursed job expenses that exceeded two percent of their adjusted gross income on their income tax return. Since 2018, employees working at home can no longer deduct their out-of-pocket expenses. Only gig workers and self-employed free-lancers could still claim the deduction for qualifying costs—the rental or mortgage cost of the part of their home that was used as a home office, plus maintenance, insurance, utilities, a proportionate share of property taxes and security system fees.

The bottom line is that you need to have self-employment income to benefit from the home office deduction. If you find yourself temporarily furloughed and start taking on assignments on the side, then you can claim the deduction—if your home is your principal place of business, and if you have set aside a “separately identifiable space” in the home (not, say, the kitchen table). During this pandemic, every penny—and tax savings—counts.

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