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  • Writer's pictureMarcus Williamson

Home Office Confusion

I have seen an increasing number of questions regarding the home office deduction available to individual tax payers. The rise of #WFH has multiplied this exponentially. Most of the internet gives really bad advice in this situation. "Open an LLC - you can deduct anything!" seems to be a new favorite nugget of wisdom that goes around. Let's look at a few things you need to know.

  1. If you are exclusively a W-2 employee of a business and you have an office at your house that you are using to work remotely during this lovely pandemic, you do not qualify for the deduction. Full stop.

  2. If you are self-employed and your home office is the kitchen table, your daughter's bedroom vanity, or a poolside lounger, you probably claim that as a home office. To qualify, you need a dedicated space used exclusively for business.

  3. Your home office needs to be the primary place you operate your business or meet with clients/patients. If you work at job sites outside your home but use a home office to do admin, billing, etc. work, this also qualifies.

  4. You can choose the simplified method by taking $5 per square foot of your home office, up to 300 square feet, for a maximum deduction of $1,500. As long as your home office qualifies, you can take this tax break without having to keep records of the specific expenses. If you want to use the Easy Button, here's your chance. No additional record keeping or tax forms necessary.

  5. Alternatively, you may choose the standard option. As with all things related to tax code, it gets complicated. Check out IRS Publication 587 and the instructions for Form 8879 for some light bedtime reading. Under this method you can deduct a proportion of your expenses based on the square footage of your home office in relation to your total square footage of your home. Except some expenses you can deduct in full. I would consult a friendly CPA before attempting this.

As of today (August 21, 2020) this is all accurate advice. With the election looming and potential tax law changes on the horizon, it's more important than ever to be sure you have a trusted professional in your corner to navigate the beast that is the Internal Revenue Code.

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