While the simplified option may be easier, you could be losing out on some additional deductions by not using the regular method. With the simplified option, your home office square footage is multiplied by a predetermined rate set by the IRS. The regular method requires calculations using IRS Form 8829, Expenses for Business Use of Your Home, to deduct your home office expenses. How do you calculate the deduction?Ī home office deduction can either be calculated using the regular or simplified option. However, if you worked for an employer but also had a freelance side job or were temporarily self-employed, you can claim the deduction during the months you worked in those positions, although you must have some Schedule C income to be eligible.Įven if you were only self-employed for a few months out of the year, you can still claim a partial home office tax deduction. This tax break is for those who are self-employed, freelancers, independent contractors, or gig workers.ĭue to the Tax Cuts and Jobs Act of 2017, remote employees who work for an employer in W-2 positions are no longer eligible for the tax break. While more people have been working from home, not everybody can take advantage of the home office tax deduction. It is also wise to consult with a tax professional for advice. If you’re unsure which deduction method will yield you the highest tax deduction, try both calculations to find out. When calculating a home office tax deduction via the regular method, workers need to calculate their home expenses, including utilities, and then multiply that sum by the percentage of their home dedicated as office space. Using the regular method, however, could lead to more considerable tax savings because you can deduct the depreciation of your home. However, there is no home depreciation deduction available for the years the simplified option is used. Additionally, with the simplified option, workers can claim in full all home-related itemized deductions on Schedule A. With the simplified method, taxpayers receive a deduction of $5 per square foot used for the home business, with a maximum of 300 square feet. In tax year 2013, the IRS introduced a simplified option to calculate the deduction for home offices, as opposed to the more in-depth regular method. What is the home office tax deduction?Ī home office tax deduction is a deduction that eligible workers can take if they have a dedicated in-home office space, which is strictly used for business. Here’s what you need to know about home office tax deductions and how to check your eligibility. Those who work from a home office may be eligible for a home office tax deduction. With the prevalence of remote and hybrid work schedules, and the rise of hustle culture, much of the workforce in the United States has taken on freelance or gig work to supplement their primary source of income. Refer to the page, Independent Contractor (Self-Employed) or Employee? or Publication 15-A, Employer's Supplement Tax Guide, for more information.While more people have been working from home, not everyone can take advantage of the tax deduction. However, your earnings as an employee may be subject to FICA (social security tax and Medicare) and income tax withholding. If an employer-employee relationship exists (regardless of what the relationship is called), then you are not an independent contractor and your earnings are generally not subject to self-employment tax. What matters is that the employer has the legal right to control the details of how the services are performed. This applies even if you are given freedom of action. You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). To find out what your tax obligations are, visit the Self-Employed Individuals Tax Center. The earnings of a person who is working as an independent contractor are subject to self-employment tax. If you are an independent contractor, then you are self-employed. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. However, whether these people are independent contractors or employees depends on the facts in each case. People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors.
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