Should you be filing for a Home Office Reduction?

I am always looking for the silver lining, making lemon out of lemonades.   When COVID claimed our independence and we were all forced to WFH (work from home), I saw the opportunity to coach my clients on creating a tax deduction by having a dedicated space in their home or apartment for work. 

I have had a home office for almost thirty years and have loved the fact that we could write off some of the expenses against our tax burden each year.   I have a dedicated office space with storage and an ensuite bath.  We use the dining room for meetings, conference calls via zoom and layouts for boards, blueprints and color scheming.  

During lockdown, which is continuing for many of us, a self-employed or an independent contractor (1099) and without an office, then you will be able to take advantage of you’ll be able to take advantage of this perk.  While it is easier to take the deduction if you use your home as your primary place of business, to further the benefits, if you have an office somewhere else but routinely use part of your home exclusively for conducting business, feel free to take this deduction. 


Check out this link for more specific info from the IRS regarding your home office deduction.

Speak to your accountant before you launch into this course of action and know that there are two options: simplified or standard.  The simplified option allows you to multiply $5/square foot for the size of your home office, maxing out at 300 square feet or $1500.  The standard option allows you to take a percentage of the actual expenses of your home including rent or mortgage interest, homeowners or renters’ insurance, and utilities.  You may even be able to include a portion of property taxes and depreciation.  This is all calculated by the square footage of your home office relative to its total square footage.

Using your  Schedule C of your personal tax return, you indicate the deduction here.  If you opt for the standard over the simplified option, you are required to complete Form 8829, which will show the IRS the details of your calculations.

While all of the above is promising and uplifting, if you are a W2 employee, or receive a paycheck from your employer, it is unlikely that you will be able to take this deduction for a home office space.   There are a few caveats.  

If you or your employees are forced to work at home and are still responsible for unreimbursed expenses (use of phone, internet, other increased costs in utilities, new furnishings, etc.), then those necessary expenses could be deducted on your personal returns. Speak to your accountant about completing Form 2106.  Now, this as it could be a slippery slope and the worst thing would be to have the IRS flag your return for an audit.