Dear Garden State Trust:
I’ve been working from home during the pandemic, and my employer has indicated that will probably continue for me at least part time this year as well. Can I take a tax deduction for my home office?
You are most likely not eligible to take a deduction for home office expenses. One of the key changes included in the Tax Cuts and Jobs Act of 2017 was the elimination of the deduction for unreimbursed employee expenses. Accordingly, employees will not get a deduction for home office expenses until that tax rule expires in 2026. That loss of deduction was painless for most taxpayers because the standard deduction was roughly doubled by the same legislation.
Self-employed taxpayers may still be able to take the deduction, however. Three tests must be passed:
(1) the home office must be used exclusively for business;
(2) it must be used on a regular, ongoing basis; and
(3) it must be the taxpayer’s principal place of business.
The simplified home office deduction is $5 per square foot, to a maximum of $1,500. The regular deduction is 100% of the direct expenses of the home office and a ratable amount of the indirect expenses, such as taxes, utilities, and rent.
See your tax advisor to learn more.
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