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TAXES 2020

Will You Qualify for the Home Office Tax

Deduction?
Kate Dore
Yesterday 11:30AM • Filed to: TAXES 15 1

Image: DimaBerlin (Shutterstock)

As the pandemic ramped up, millions of employees shifted to remote work.

According to a Federal Reserve Bank of Dallas report, 35.2% of employees
worked from home in May, compared to only 8.2% in February. If you’re now
fully remote, you may be eager to see if you’re eligible for a home office tax
break—but the eligibility rules can be confusing. Here’s what to know.

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Employee vs. self-employed

The key to unlocking the home office tax deduction is your employment status.
Most full-time workers are W-2 employees. This means they go through the
company’s payroll—and may have income, Social Security, and Medicare taxes
withheld from each paycheck. Why this matters: W-2 employees can’t deduct
unreimbursed job-related expenses through 2025 thanks to the Tax Cut and
Jobs Act.

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But if you’re a contract worker, aka a 1099 employee, you are considered self-
employed—and may qualify for the home office tax deduction. It may also be
possible to deduct expenses like part of your internet bill, cell phone bill, or
other work-related costs.

What qualifies as a home office

While it may be tempting to take the home office deduction, there are some
specific rules to follow. For starters, your home office must qualify as
“exclusive and regular use” and the “principal place of your business,”
according to the IRS. It must be a designated space (i.e. not your kitchen table)
that you only use for work. The IRS shares a couple of examples:

You can deduct expenses for a separate free-standing structure, such as a

studio, garage, or barn, if you use it exclusively and regularly for your
business. The structure does not have to be your principal place of business
or the only place where you meet patients, clients, or customers.

Generally, deductions for a home office are based on the percentage of your
home devoted to business use. So, if you use a whole room or part of a room
for conducting your business, you need to figure out the percentage of your
home devoted to your business activities.
There’s a full explanation of exactly what qualifies for the home office tax
deduction in Publication 587. (There isn’t a new version for 2020 yet.)

How to claim the home office deduction

This deduction goes on Form 8829, which is paired with Schedule C, your form
for business profit or loss. This means you can still claim the home office tax
break even if you take the standard deduction—and don’t itemize deductions
—on Form 1040.

There are two options to calculate the home office deduction: the simplified
option or the regular method. If you’re struggling with these calculations—or
whether your office qualifies—you should speak with a tax professional.

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Kate Dore Posts Twitter

Personal finance writer. Candidate for CFP® Certification.

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DISCUSSION

katie_keys
Yesterday 11:42AM
That Trump Tax law is really screwing me over. I’m moving for the second time under
it, meaning a lot more of my moving allowance is taxable. And I’ve been teleworking
since March and will continue to do so for the foreseeable future, so losing out on
that.  I think it’s personally going to end up costing me something like 8K.

And don’t come at me with that stuff about how the standard deduction is larger.  My
mortgage is young enough/ interest high enough I am still doing itemized.  

See all replies

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